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'Abominable' wins the box office with a solid $21 million opening (CMCSA)

Sun, 09/29/2019 - 10:00am

  • DreamWorks Animation/Pearl Studios won the domestic box office for Universal with its animated movie "Abominable."
  • The movie brought in an estimated $20.85 million.
  • It's the seventh Universal title to win the domestic box office this year, which passes Disney to be the most of any studio.
  • Visit Business Insider's homepage for more stories.

Universal's DreamWorks Animation has teamed up with Chinese production company Pearl Studios to release the animated movie "Abominable," and the companies are cashing in on the collaboration. 

The cute tale of a magical yeti who with the help of a group of kids finds his way back home brought in $20.85 million domestically this weekend to win the box office. It has earned $10.2 million internationally.

The win for Universal marks the seventh for the studio in 2019, that breaks a tie with Disney for the most number one movies at the domestic box office (eight if you count the Focus Features win last weekend for "Downton Abbey," which is owned by Universal). It's also the third original film by Universal this year to top the domestic box office (the other two were "Good Boys" and "Us.")

Read more: Spider-Man will stay in the Marvel Cinematic Universe in a stunning reversal for Disney and Sony

This marks the first time DreamWorks has opened a movie in September, and it chose the right time to do it. With no other kid-focused titles in theaters (outside of "The Lion King," which has been in multiplexes since July), "Abominable" had no trouble finding its audience. And with a family-focused story set in Shanghai (plus many of the actors hired to do the voices being Asian), it checked all the boxes in delivering a culturally diverse property to audiences.

The motivation to go to theaters next week will be quite different when Warner Bros. releases the ultra-violent "Joker."

 

SEE ALSO: The top 9 shows on Netflix and other streaming services this week

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NOW WATCH: Alexander Wang explains how to wear all black without looking boring

The WeWork S-1t show, Citadel cuts after compliance breach, and Best Buy's healthcare plans

Sun, 09/29/2019 - 9:07am

Hello!

At 7:12 on a mild late-summer morning in New York City, WeWork's registration papers hit the Securities and Exchange Commission's website. 

So starts Dakin Campbell's excellent read on how WeWork spiraled from a $47 billion valuation to talk of bankruptcy in just six weeks. Dakin writes: 

Almost immediately, all hell broke loose. A steady stream of rapid-fire headlines detailed Neumann's self-dealing, mismanagement, and bizarre behavior. Within 33 days the offering was scuttled, WeWork's valuation plummeted 70% or more, and Adam Neumann, who believed he would become the world's first trillionaire, was ousted as CEO. What was supposed to be Neumann's coronation as a visionary became one of the most catastrophically bungled attempted debuts in business history.

It's a startling story. We'll have lots more reporting on WeWork in the coming days, so keep an eye out for that. For now, here's what we're looking at: 

What did we miss? Let me know.

-- Matt

The future of transportation

I'm excited to announce that Business Insider is hosting an event focused on the future of transportation in San Francisco on Tuesday, October 22. IGNITION: Transportation will feature speakers like Zoox cofounder Jesse Levinson, Waymo chief external officer Tekedra N. Mawakana, and JetBlue Technology Ventures president Bonny Simi.

The event is complimentary. You can get more information on the event and apply to attend right here

The business world's 'show-and-tell' on sustainability

One of the main topics discussed at the United Nations General Assembly in New York this week was the urgency required for completing the Sustainable Development Goals (SDGs) by 2030.

Rich Feloni caught up with Andrew Wilson, the International Chamber of Commerce's permanent observer to the United Nations. He told us why he's angry at the business world's "show-and-tell" approach to sustainability, and he shared an advance copy of his plan to fix that

Finance and Investing

Citadel just cut a team managing more than $1 billion after an analyst and a data scientist broke internal compliance rules about trading in personal accounts

Citadel has liquidated a portfolio with more than $1 billion in energy investments run out of Texas after the analyst Josh Lingsch and the data scientist Derek Allums were fired from the firm this week for violating the firm's rules around trading in personal accounts. 

Meet the 8 executives leading the most innovative tech projects on Wall Street

Take a quick scan of the headlines on any given day, and it might seem as if startups are driving the most interesting tech developments on Wall Street. 

The 'single biggest risk' to investors is being widely ignored — and Morgan Stanley warns it could spawn a recession within months

The constant headlines surrounding the trade war with China have temporarily overshadowed another danger that's brewing on home soil. 

Tech, Media, Telecoms

Why investors are starting to make big bets on Spinnaker, a Netflix-started software project that could be the next big thing in cloud computing

The first wave of cloud-computing startups focused on helping companies simply figure out how to operate in this new world of servers, rented from megaplayers like Amazon Web Services or Microsoft Azure.

Five years after buying Oculus for $2 billion, Facebook says VR is ready to take off. Here's what industry insiders think Facebook is finally getting right, and what's holding VR back.

At this year's Oculus Connect — Facebook's annual developer's conference for its virtual reality products— it's impossible to escape the event's tagline: "The time is now." 

The 16 power players leading the rise of free ad-supported streaming services in 2019

Ad-supported streaming services are taking flight in 2019, as more tech companies, digital startups, and legacy-media brands clamor to capture the billions in advertising dollars that are moving away from traditional TV.

Healthcare, Retail, Transportation

Best Buy just gave a 109-slide presentation on the future of the company. Here are the 7 crucial slides that spell out why the company is going all-in on healthcare.

We just got a clearer picture of how Best Buy plans to push into the $3.5 trillion US healthcare market.

We asked Uber Freight head Lior Ron everything about the tech giant's push into trucking — from profitability to matching algorithms to tackling the trucker shortage. Here's the full interview.

Uber Freight is a freight-brokerage technology for truck drivers and shippers from Uber. The tech giant is investing more and more into Uber Freight. 

Join the conversation about this story »

NOW WATCH: I cleaned my entire apartment with 4 of Amazon's highest-rated cleaning robots, but I could've done a much better job myself

THE RISE OF BANKING-AS-A-SERVICE: The most innovative banks are taking advantage of disruption by inventing a new revenue stream — here's how incumbents can follow suit

Sun, 09/29/2019 - 9:02am

Fintechs are encroaching on incumbents' share in the banking game, forcing them to explore new business models — but tech-savvy legacy banks can treat this as an opportunity rather than a threat by moving into the Banking-as-a-Service (BaaS) space.

BaaS platforms enable fintechs and other third parties to connect with banks' systems via APIs to build banking offerings on top of the providers' regulated infrastructure. This means banks that launch BaaS platforms can actually benefit from fintechs entering the finance space, as it turns fintechs into customers rather than just competitors. Other benefits from launching a BaaS platform include being able to monetize such platforms, establishing strong relationships with fintechs, getting ahead of the curve in terms of open banking, and accumulating additional data from third parties.

In The Rise of Banking-as-a-Service, Business Insider Intelligence looks at the benefits banks stand to gain by offering BaaS platforms, discusses key players in the industry that have already successfully launched BaaS platforms, and recommends strategies for FIs looking to move into BaaS.

The companies mentioned in this report are: BBVA, Clearbank, 11:FS Foundry, Starling.

Here are some key takeaways from the report:

  • Offering BaaS also allows banks to unlock the opportunity presented by open banking, which is becoming a vital part of the financial services industry.
  • There are two key types of players — BaaS-focused fintechs and BaaS providers with a retail banking arm — that banks will need to learn from and compete against in the BaaS space.
  • Banks that have embraced digital will have an easier time ensuring that their infrastructure and systems are suitable for third parties.
  • It's vital for incumbents to accurately assess third-party needs to create an in-demand portfolio of white-label BaaS products.

 In full, the report:

  • Outlines what BaaS is and how it relates to open banking. 
  • Highlights the benefits of launching a BaaS platform, including two different monetization strategies.
  • Explains what BaaS players are currently doing in the space, and outlines the services they offer.
  • Discusses what incumbent players can do in order to launch their own successful BaaS platform.

Interested in getting the full report? Here are four ways to access it:

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
  2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
  3. Join thousands of top companies worldwide who trust Business Insider Intelligence for their competitive research needs. >> Inquire About Our Corporate Memberships
  4. Current subscribers can read the report here.

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Billion-dollar storms could lead to the next housing crash, experts warn — and big banks have adopted the same worrisome strategy as last time

Sun, 09/29/2019 - 7:42am

  • A new paper identifies a troubling pattern in the US real estate market: Large US banks are selling coastal mortgages to Fannie Mae and Freddie Mac, two government-sponsored companies. 
  • As natural disasters become more frequent and intense, coastal homeowners could be more likely to default on their mortgages, the authors found.
  • Fannie Mae and Freddie Mac are backed by US taxpayers, so citizens could end up footing the bill on some mortgage defaults. 
  • These circumstances could lead to a housing crash similar to the one in 2007, the authors warn.
  • Visit Business Insider's homepage for more.

As hurricanes and floods become more frequent and intense, the threat to coastal real estate continues to rise. 

By the end of the century, around 2.4 million US homes could experience chronic flooding — the equivalent of all the homes in Los Angeles and Houston combined. That's $912 billion worth of residential property, or around 3% of the US housing market. But only 15% of Americans have a flood insurance policy.

Mortgage lenders seem to be taking note of these risks. 

A new paper from economics professors at HEC Montreal and Johns Hopkins University identified a pattern among US banks: They've been selling mortgages in coastal areas to Fannie Mae and Freddie Mac.

The two government-sponsored companies are supposed to make the housing market more stable and affordable, but they're perhaps best known for their role in buying risky mortgages ahead of the 2007 financial crash. When the federal government bailed them out, it cost taxpayers $187 billion.

By purchasing a mortgage from lenders, Fannie and Freddie incur the financial risk if a homeowner defaults on a loan. And the chance of default becomes more likely following a hurricane, the new paper found.

Taxpayers, then, would be responsible for footing the bill. 

Coastal mortgages are becoming riskier

The paper looked at 15 natural disasters that took place between 2004 and 2012 and caused at least $1 billion in economic losses. The list includes disasters like Hurricane Sandy, which caused an estimated $60 billion worth of economic damage, and Hurricane Katrina, which caused an estimated $82 billion.  

In the first year after one of these hurricanes, the authors found, the odds of home foreclosure rose by 3.6 percentage points. Within three years, the odds rose by up to 4.9 percentage points. The authors also discovered that the share of mortgages sold to Fannie and Freddie increased by 10% after a billion-dollar hurricane, a pattern led by large national banks.

Read more: 36 photos show how extreme weather and natural disasters have gotten more intense over the years

"We didn't slice or dice the data," one of the authors, Amine Ouazad, told Business Insider. "I spent the last year really making sure that these results were robust, that they were representative of the entire mortgage market and the lending practices of typical lenders."

Transferring risk to the federal government could lead to another housing crash

The study suggests bad news for everyday citizens, Ouazad said — if a disaster leads homeowners to default on their mortgages and many of those loans were offloaded to Fannie and Freddie, US taxpayers could wind up on the hook again. 

What's more, Fannie and Freddie's involvement could make homeowners think it's safe to buy risky coastal property, since those loans are guaranteed by the government.

"We may face another kind of subprime crisis" if things don't change, Ouazad said, referring to the financial crisis that hit American homeowners from 2007 to 2010. That crisis originated with lenders creating a strong demand for mortgages among people who might struggle to repay them. 

Climate change might prove to be the next reason homeowners can't afford their payments.

"Are we playing the same game as in 2007?" Ouazad asked. "If flood risk becomes very large because we've incentivized households to live in those coastal areas, there might not be even an ability to diversify its risk."

SEE ALSO: The next housing crash could be caused by weather, not Wall Street – here are the places that should be worried

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NOW WATCH: 4.2 million Americans could be displaced by rising sea levels this century — see if your county is at risk

Social fitness startup Strava's CFO says the recent IPO flubs show it's time for Silicon Valley to rethink the 'grow at all costs' mantra

Sun, 09/29/2019 - 7:32am

  • Christine Park joined fitness social media startup Strava as chief financial officer in July after working as chief operating officer at venture capital firm Goodwater Capital for two years.
  • Park told Business Insider that the role of CFO in Silicon Valley is changing because the businesses themselves are changing, and gives the example of her comprehensive operations-focused role at Strava as what executives should expect of financial officers.
  • Strava is currently unprofitable, so Park said that is her primary goal for her first year. But she cautioned that the "grow at all costs" mentality is no longer viable for software startups hoping to become profitable.
  • Peloton's lackluster IPO has indicated that public markets are hesitant to invest in companies with high private valuations but struggle to maintain profitability. Peloton is a Strava business partner.

Silicon Valley used to push startups to grow at all costs. But as the recent slate of disappointing public debuts shows, investors think it's time for the unsustainable model to change.

Christine Park, Chief Financial Officer at fitness-based social media network Strava, agrees. As the financial executive at a leading startup, Park is in the select group of Silicon Valley employees that can make that change happen.

"That's where you can say, Hey, profitability does matter," Park told Business Insider. "As you continue to scale a business, you have a bigger household. It's more about the mentality of being efficient, and balancing that with continuing to hit growth metrics."

Read More: Tech IPO injury report: Some of the biggest names in tech have taken a beating after going public this year

Park joined the startup in July after working as the chief operating officer at venture firm Goodwater Capital for two years. In a tight labor market, which can be even tighter for young companies looking to hire senior financial executives, startups may not be able to recruit seasoned CFOs with multiple exits under their belt. But it's this narrow definition of who a CFO is and what is in his or her purview that Park wants to undo.

"The CFO seat allows you to have this 10,000-foot view of what's happening, the marketplace, the capital structure, and the broader implications of what's going on," Park said. 

Part of that change, Park said, is because data analytics has become increasingly important across all functions of the business, from marketing and customer service to engineering and design. In the future, all CFO candidates will have to come to the table with an understanding for and interest in working with data to make the business succeed, instead of retroactively reporting key performance indicator metrics.

"The role has changed in terms of what you're doing, and what the perception is internally of what you should be doing," Park said. "Especially when you think about venture capital backed companies, you have to have someone who can be external facing with a strong working knowledge of how to think about scaling finance and accounting for the long term."

Which is exactly why, Park says, that a grow-at-all-costs mentality isn't going to help startups like Strava that aren't profitable. It's one of her goals over the next year to change that, but as recent disappointing public offerings have proven, there isn't as much of an appetite for breakneck growth as there is for a measured strategy for sustainability, Park said.

"It's very frenetic, for lack of a better term, but it's just the way it works," Park said. "It's how businesses are built. But I am making sure that everyone's kind of marching to the same beat, and that requires a certain level of system management and controls."

Park is keeping a close eye on some of Strava's business partners like Peloton that haven't seen the most favorable reception in public markets, but said Strava is not considering its own IPO any time soon.

SEE ALSO: The startup behind Patagonia's Worn Wear resale line just raised $20 million in fresh funding to help traditional retailers compete with Poshmark and The RealReal

Join the conversation about this story »

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

We spoke to 5 money managers about how Trump impeachment proceedings could impact the stock market. Here's what they said.

Sun, 09/29/2019 - 7:05am

  • Impeachment proceedings against President Donald Trump dominated headlines all week.
  • The stock market initially traded down on the news, but has since whipsawed amid other geopolitical uncertainty.
  • Money managers are split on how the impeachment proceedings could impact the market going forward. Here's what five of them told Markets Insider. 
  • Read more on Business Insider.

On Tuesday, House Speaker Nancy Pelosi announced that the House of Representatives will open a formal impeachment inquiry against President Donald Trump. 

The proceedings came after a whistleblower complaint revealed that the President asked Ukrainian President Volodymyr Zelensky to investigate former Vice President Joe Biden and his son, Hunter, over corruption allegations at least eight times during a July phone call.

Stocks tumbled following the announcement, then gained Wednesday when President Trump signaled that a deal between the US and China could be coming soon. By Thursday, geopolitical fears had taken over investor sentiment again and stocks traded mostly lower. 

The impeachment process is happening against a backdrop of mounting geopolitical uncertainty that's already roiled markets over the summer. US economic data that shows that the trade war is starting to impact US consumers, businesses, and could even drag down the US economy. And outside the US, other large economies are either in recession, like Germany, or precariously on the brink, like Italy. 

So far, it's unclear if the impeachment proceedings will have a direct impact on the market, according to money managers interviewed by Markets Insider. And even though President Trump tweeted that the market would crash if Democrats impeach him, the stock market is still within 3% of a record high. 

Read more: A $490 billion investing firm is worried that record corporate profitability is unsustainable. Here's its how it's preparing for an 'inevitable' collapse.

"I believe the market is mainly going to look past this," Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance told Markets Insider in an interview. 

He thinks the market will make a big distinction between Trump being impeached, and him actually being removed from office. At this point, it doesn't look like there will be enough Senate Republicans willing to vote for Trump's removal, Zaccarelli said. 

Still, industry watchers are split on how the impeachment proceedings may impact other market moving events such as the trade war.

"You could make the argument that he might be more likely to do a deal with China to get the economy going again," Zaccarelli said.

Given that the trade war has been a major market mover over the last year and a half, that could have a huge impact on US markets. 

Business Insider spoke with five money managers about what the impeachment proceedings mean for the stock market and investors going forward. Here's what they said:

Dom Catrambone, CEO of Volshares Large Cap ETF: "Political games, predictions and proceedings are all temporary events"

"As political headlines continue to take center stage, it is important to remember that political games, predictions and proceedings are all temporary events as it pertains to the US markets," Dom Catrambone of Volshares told Markets Insider in an email.  

"What these impeachment proceedings will mean for the market in the long term is very hard to diagnose, but it is certain that the proceedings will lead to a higher degree of volatility," he said.

"One key element in today's trading environment is the advent of algorithmic trading," he said. "In this trading method, various terms from political and news coverage, such as 'Trump' and 'Impeachment' will automatically trigger trading signals, therefore adding non-fundamental reasons for a particular upswing or downturn in the markets."



Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance: "It's mostly noise"

"To the extent that President Trump is impeached, but not removed from office we believe the market will completely look past all of these political headlines," Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance, told Markets Insider in an email. 

This has happened before, he wrote: "During the time the House voted to impeach Bill Clinton and the Senate decided not to remove him from office, the S&P 500 rose 27%," he said. 

For investors watching the news right now, Zaccarelli says most impeachment headlines should be ignored. 

"It's mostly noise," he told Markets Insider in an interview. "Unless something material changes and it looks more likely that President Trump is actually going to be removed from office, I wouldn't do anything differently than you're already doing." 

If you've got a long enough time horizon you shouldn't be looking at market swings anyway, he said, and when the market goes down, it's actually a good time to buy. For retirees living off of their investment income, the situation is different, he said.



Thyra Zerhusen, chief investment officer of Fairpointe Capital: "We are sort of tiptoeing around"

"We have had an extensive period of a lot of volatility," Thyra Zerhusen of Fairpointe Capital told Markets Insider in an interview. Trump has added to this with his tariffs on, tariffs off negotiations with China and Mexico, she said. 

"I think it is not productive, all this uncertainty," she said. "Uncertainty is not good for the stock market, and people are trying to figure out where they can hide."

In addition, Zerhusen said that the mounting uncertainty has been damaging to companies.

"It hasn't been productive for capital investments," Zerhusen said, "because uncertainty is not good for companies trying to figure out where to put new production. It's disruptive." 

Still, right now, she's not going to change anything. "We are sort of tiptoeing around, but basically doing the same thing," she said. "You know, some stocks are quite undervalued and we add to those," while always keeping the impact of tariffs in mind, she said.



David Donabedian, chief investment officer of CIBC Private Wealth Management: "The market is not shocked easily"

"After a tumultuous two years, the market is not shocked easily," David Donabedian, chief investment officer of CIBC Private Wealth Management,  told Markets Insider in an email. 

"While there has been a slightly negative market reaction to the House impeachment inquiry, this is entirely rational, and nothing that could be called a panic," Donabedian said. "Investors are less scared or shocked by the possibility of  impeachment and more concerned with the fundamentals of the market."

Going forward, Donabedian said markets will be watching to see if policy and trade talks move ahead. Trade has been the "biggest cloud over financial markets" for the last 18 months, and the worry is that impeachment proceedings could stall progress even further. 

He'll be watching Nancy Pelosi for signs of what might come. 

"My bet is that Pelosi leans in that direction of saying we can walk and chew gum at the same time," Donabedian said, and that she will work to move forward both the impeachment proceeding as well as policies such as the USCMA trade deal. 

"We actually might see passage of the new NAFTA before the end of the year," he said. That, or a trade agreement with Japan, "would be a big deal." 



Lewis Altfest, chief investment officer of Altfest Personal Wealth Management: "The shock itself may take some time"

"This is a kind of a shock to the system, although the shock itself may take some time," said Lewis Altfest, chief investment officer of Altfest Personal Wealth Management, in an interview with Markets Insider. 

The key uncertainty is whether the US and China will come together and agree on a trade deal, Altfest said. But, if Trump is under extra pressure because of an impeachment proceeding, "it becomes even more important that he does a lot of deals successfully," said Altfest.  And, "it could result in him having a deal, but it isn't really a good deal overall," he said. 

Meanwhile, the stock market is high but not approaching a bubble, Altfest said, and there are concerns about the underlying economy.

He said investors should be mindful of the eventual outcome of current political events. To protect themselves from market swings, "they should be conservative in building their portfolio and have more stable stocks, and value oriented stocks, than higher valuation stocks," he said. 



You could earn more than $150 back by putting a year's worth of dining out on a credit card like the Amex Gold

Sun, 09/29/2019 - 6:22am

  • According to the Bureau of Labor Statistics, the average American family spends about $3,424 on dining out each year.
  • No matter how much you spend on food away from home, you can maximize those purchases with a card that earns bonus points or cash back on dining, like the Chase Sapphire Reserve, American Express® Gold Card, or the Capital One® Savor® Cash Rewards Credit Card.
  • Here's how much you could earn from a year of dining out using the $3,424 figure. If you spend more, you could earn even bigger rewards.

There's plenty to like about dining out: trying new foods, hanging out with friends and family in a fun atmosphere, and most of all, not having to worry about doing the dishes.

Still, all that fun isn't cheap. The average American family spent $3,424 per year from 2017-2018 on "food away from home," according to the Bureau of Labor Statistics.

One way you can minimize the hit to your wallet is by using credit cards that offer higher rewards rates on dining out. There's no shortage of credit cards out there with higher bonuses on restaurant purchases, but some are better than others. Here's what you can expect to earn from a year of eating out with some of the best cards for dining purchases.

Keep in mind that we're focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which can far outweigh the value of any rewards.

When you're working to earn credit card rewards, it's important to practice financial discipline, like paying your balances off in full each month, making payments on time, and not spending more than you can afford to pay back. Basically, treat your credit card like a debit card.

Read more: The best credit cards for earning rewards on dining out, no matter how much you spend

Chase Sapphire Reserve: 10,272 Ultimate Rewards points

Points on dining: 3x Ultimate Rewards points 

Annual fee: $450 

At first glance, the Chase Sapphire Reserve doesn't look like it'd be worth its high price tag. But if you enjoy traveling as well as dining out, this is one card that should be on your radar, because it can lower the cost of both activities.
You'll get a $300 travel credit each year, which most travelers should be able to fully use even if they only travel locally for weekend trips. This effectively brings the price down to $150, and at a dining spend level of $3,424, you'd earn 10,272 points.

Read more: Chase Sapphire Reserve review

One of the neat things about the Chase Sapphire Reserve card (as opposed to any of the other Chase cards that earn Ultimate Rewards points) is that your points are worth 1.5 cents apiece when redeemed for travel purchases through the Ultimate Rewards portal.

This means that 10,272 points are worth $154.08 toward travel, which just edges out the cost of the card if you also take advantage of the $300 travel credit. Thus, you're essentially using your dining purchases to fund the annual fee of this card, and anything else you spend on dining and travel will only earn you more valuable Ultimate Rewards points.

Click here to learn more about the Chase Sapphire Reserve. American Express Gold Card: 13,696 Membership Rewards points

Points on dining: 4x Membership Rewards points at restaurants worldwide

Annual fee: $250

If the high price tag of the Chase Sapphire Reserve scares you and you're more of a homebody than a jetsetter anyway, the American Express Gold card might be a better option.

This card features 4 points per dollar spent on dining out and at US supermarkets, although 4x on US supermarket purchases is limited to the first $25,000 you spend per year, then it's 1 point per dollar (still a tough bar for most of us to reach).

Read more: American Express Gold card review

Amex's Membership Rewards points are valued at roughly 2 cents each when redeemed toward travel, meaning that the average American family would earn up to $273.92 (or 13,696 points) just from dining out alone. This card also comes with a valuable $120 dining credit per year at certain outlets such as Ruth's Chris Steak House, Boxed, Grubhub, and The Cheesecake Factory. Note, though, that this credit is rationed out to just $10 per month.

That's more than enough to offset the cost of the annual fee for this card, and besides, you'd still earn even more from your grocery purchases.

Read more: The American Express Gold card has a $250 annual fee, but two benefits alone can get you $220 in value each year.

Click here to learn more about the Amex Gold card. Capital One Savor Card: $136.96 in cash back

Cash back on dining: 4% back 

Annual fee: $0 for the first year, then $95 

If straight-up cash back is more your style and you don't mind opening several cards with bonuses in different categories, you should strongly consider the Capital One Savor card.

This card offers 4% cash back on dining purchases, which would translate into $136.96 in cash back for the average American family. That's more than enough to cover the $95 annual fee that Capital One starts charging in the second year.

This card is also especially valuable if you tend to spend more money on entertainment as well, because the 4% cash back also applies to this category, and you'll get 2% back at grocery stores. Alas, everything else only earns a measly 1% cash back, so we'd recommend supplementing this card with another card that offers a higher all-around cash back rate as a sort of catch-all for other purchases.

Read more: The best cash-back credit cards

Click here to learn more about the Capital One Savor card. Uber Visa Credit Card: $136.96 with no annual fee

Cash back on dining: 4% back

Annual fee: $0

Don't let the name of this card fool you. The Uber Visa card offers tremendous value for foodies, especially frugal foodies who don't want to pay an annual fee.

Not having to pay an annual fee is particularly salient. If you pay off your card in full and on time each month (as you should with any credit card), you won't have to pay any fees or interest at all for this card, meaning any rewards you earn are totally free. At a spend level of $3,424, you'd earn $136.96, and since you don't have to pay an annual fee, that's all cash you can keep in your pocket.

The Uber Visa card offers higher cash-back rates for other purchases, too: 3% cash back on specific travel purchases including hotels, airfare, and vacation rental homes, and 2% cash back on online purchases, including Uber. This means that strangely enough, the Uber Visa card offers a higher cash-back rate on dining than it does on Uber itself — but hey, we'll take it.

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NOW WATCH: Nxivm leader Keith Raniere has been convicted. Here's what happened inside his sex-slave ring that recruited actresses and two billionaire heiresses.

Wall Street titans including JPMorgan and Pimco are flagging a striking disconnect in markets that exposes how worried investors are about another crash

Sun, 09/29/2019 - 5:05am

  • Large investors from Pimco to JPMorgan are wary of the dissonance between the strength of the US economy and other parts of the world that are on the brink of a recession.
  • This contrast has stoked expectations that the slowdowns elsewhere will eventually spread to the domestic economy and stock market.
  • Click here for more BI Prime stories.

When Mary Callahan Erdoes examines the US economy, she comes to the conclusion that things look great.

When she expressed this viewpoint at the recent CNBC Institutional Investor Delivering Alpha conference, none of her co-panelists were quick to disagree with her. As the CEO of JPMorgan Asset and Wealth Management, she has insights from the Chase accounts of half of America's households. And she presented the receipts to back up her claim that "everything looks fine."

The share of incomes that people needed to pay their car loans on time is at an all-time low, Erdoes said. A record number of people — presumably unbothered about overdrawing their accounts — are using auto pay for their credit cards. The share of people who pay less than 2% of their credit card debt is at all-time lows.

Piled onto these internal stats is the lowest national unemployment rate in 50 years, and job openings in excess of the number of unemployed.

But Erdoes has also noticed that there's "so much handwringing" about the stock market. Investor sentiment would make it seem like the aforementioned support systems for corporate profits are not in place.

"The reality is so much money is going into bonds ... any kind of fixed income," she said during a panel discussion. 

The massive inflows of investor dollars into bonds this year demonstrate how much demand there is for a safety net. And investors' fears are not unfounded: The US is being propped up by the consumer, but the rest of the world does not have a similarly strong catalyst.

These divergent fortunes have made it more challenging to take big risks because the tide can turn at the drop of a hat. 

"If there was a recession in the US — if the US consumer gives up for whatever reason — markets are not priced for that in any way," said Luke Ellis, the CEO of Man Group, an active investment firm with $114.4 billion in assets.

Read more: Top Wall Street investors say they're struggling to find big, bullish stock-market bets to make — and their paralysis might signal a meltdown is looming

Everything is now globalized 

The gulf between the US and the rest of the world has also convinced stateside investors with several billions in assets that it is time to hunker down. 

"It's interesting times," Erdoes said of the contrast between the US and the rest of the world.

She continued: "They are no different than the times in the past. But our challenges have to be looked at through a different lens because everything that we think of is now globalized together."

An issue like the US-China trade war would have been a different ball game in an older era when countries were not as interdependent on each other, she added. 

For Emmanuel Roman, the CEO of $1.8 trillion Pimco, the trade war is the elephant in the room.  

"We agree with Mary," Roman said.

"We think that the consumer is the bright spot in the US economy, but that capex and the manufacturing sector is obviously already in recession, and it's difficult," he added. "And so you'll see a slow first half of 2020 and things picking up in the second half."

Ahead of this anticipated slowdown, Roman said his firm is scooping up non-agency mortgage-backed securities and some emerging-market debt.

However, he's cautious on corporate credit.

Bruce Richards, the CEO of Marathon Asset Management, went as far as saying there's a bubble in corporate debt.

Despite all that dollar-denominated assets have working in their favor, this is one space where he sees a ticking time bomb.

SEE ALSO: BlackRock's bond chief breaks down the best way for US investors to profit from the growing $17 trillion pile of negative-yielding debt

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Abandoned markets and empty cinemas: 11 photos show how ordinary people are being hit by Trump's sanctions on Iran, which are ramping up again

Sun, 09/29/2019 - 5:02am

  • President Donald Trump's administration has since last November imposed waves of sanctions on Iran's economy, aimed at crippling its leadership so badly that it acquiesces to US demands.
  • But it's Iranian daily life that's suffering from the economic pressure.
  • Inflation is running high and citizens are so squeezed that they can't afford to go the cinema or buy carpets anymore.
  • Scroll down to see 11 photos that show Iranian daily life being affected by sanctions.
  • Visit Business Insider's homepage for more stories.

TABRIZ, Iran — President Donald Trump has insisted that his crippling economic sanctions, ostensibly aimed toward the country's leadership, will help protect and improve the lives of the Iranian people.

They're not working.

Since November 2018 the US has imposed waves of "maximum pressure" sanctions on Iran's leadership — including its Supreme Leader and top Islamic Revolutionary Guard Corps officials — and has not achieved its goal of checking the regime's nuclear program.

Instead, it's the ordinary Iranians who are suffering from the economic pressure. Inflation is running high and citizens are finding their disposable income so squeezed they can't afford to go to the cinema or buy carpets for their homes anymore.

All those who spoke to Insider said they haven't seen any positive side to the sanctions, but that they are affecting every aspect of their daily lives.

Scroll down to see how US sanctions are impacting Iranians, from local skateboarders to carpet sellers to movie-goers:

Inflation is at a high in Iran, with $1 being worth 115,000 Iranian rials right now. This photo — which shows 130,000 rials — is worth $1.13.

Two years ago, $1 was worth 30,000 rials.



The Trump administration in November 2018 re-imposed the ban on importing Persian "carpets of Iranian origin," leaving once-crowded carpet bazaars empty. Many Iranians can't afford to buy the rugs, and foreigners face difficulties exporting them.

Source: US Treasury Department



Hashem Sekhavatmand, who has been selling carpets in the city of Tabriz since his teenage years, says he's never experienced a business downfall like this before.

"He should take out all Persian carpets in the White House," another carpet seller in Tabriz (not pictured) told Business Insider. "Persian carpets should have nothing to do with political embargoes."

There are no bars or clubs in Iran, so cinema is one of the most popular ways for Iranians to pass their time.

But fewer and fewer Iranians can go now because US sanctions have squeezed their disposable income.

Iran hasn't imported any Hollywood films since the 1979 Islamic Revolution, but that hasn't stopped US sanctions from affecting the country's movie industry. Inflation in the country has slashed the industry's budgets and ability to market internationally, Variety reported earlier this year.

Source: Variety



More and more young Iranians are getting into skateboarding, which is considered a western sport. They're finding it hard to source accessories and coaches for their sport.

"Iran doesn't have any local brands for skateboarding and since our country is under sanctions right now and it's really hard to import anything from the West," one skateboarder, Negin Baghi, told Business Insider. She added that skateboarding accessories are hard to find and expensive.

Iran's fallen currency has, however, made it a cheaper country for tourists. Many bazaars in touristic areas are mostly occupied by tourists.

Mohammad Javad Zarif, Iran's foreign minister, accused the US earlier this month of "DELIBERATELY targeting ordinary citizens," and called it "#EconomicTerrorism, illegal & inhuman."

Source: Javad Zarif/Twitter



Anti-US sentiment can also be seen around many Iranian cities, and the wall outside the former US embassy in Tehran here is plastered with anti-US murals. Iranian citizens can't avoid seeing them, whether or not they agree.

We found the 50 most powerful people in Bank of America's trading division. Here are our exclusive org charts.

Sat, 09/28/2019 - 1:50pm

  • Business Insider is mapping out the power structure in the global banking and markets businesses overseen by Bank of America Merrill Lynch Chief Operating Officer Tom Montag — one of the most powerful executives on Wall Street.
  • So far, we've found the 50 most powerful people in the bank's fixed income and equities divisions. 
  • Business Insider spoke with insiders, ex-employees, consultants, and other industry experts for this project.
  • Click here for more BI Prime stories.

Senior leaders across Wall Street come and go, but one executive that's stayed put over the years is Bank of America's Tom Montag.

Montag oversees the firm's global banking and markets businesses and is one of Bank of America's most powerful figures. He's long been speculated as a potential successor to CEO Brian Moynihan. 

Business Insider is mapping out the divisions overseen by Montag, which in sales and trading across fixed income and equities amounts to more than $13 billion in annual revenue for the bank.

So far, we've uncovered the top-50 people within its equities and fixed-income markets businesses. 

The two sales and trading groups Montag oversees have distinct power structures. Montag, who climbed the ranks at Goldman Sachs on the back of a stellar fixed-income career, has several key direct reports that share power within FICC.

In equities, there's one top dog: Fabrizio Gallo, one of the longest-tenured division heads in Montag's world.

Business Insider spoke with insiders, ex-employees, consultants, and other industry experts to gain insight into the reporting structure. We've focused on front-office execs that bear the primary responsibility for driving the group's revenue — no back-office roles appear in our chart. 

Here's our exclusive org chart of the most powerful people in Bank of America's $8 billion bond-trading division. We identified the the most powerful people in Bank of America's equities division. Here's our exclusive org chart.

Have more information about the organizational structure within Bank of America Merrill Lynch? Contact the reporter at amorrell@businessinsider.com or via encrypted chat with Signal or Telegram

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Chase's Marriott Bonvoy Boundless card with a $95 annual fee is now offering a 100,000-point sign-up bonus

Sat, 09/28/2019 - 11:37am

No matter where you're headed, there's a good chance you can find a Marriott hotel at your destination. That's especially true now that Marriott and Starwood have combined their portfolios — there are more than 7,000 Marriott properties post-merger, so having Marriott points can come in handy for all sorts of travelers.

If you're looking to earn more Marriott points, this newly elevated offer for the Marriott Bonvoy Boundless Credit Card could be worth it. You can now earn 100,000 points when you spend $5,000 on the card in the first three months.

Keep in mind that we're focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which can far outweigh the value of any rewards.

When you're working to earn credit card rewards, it's important to practice financial discipline, like paying your balances off in full each month, making payments on time, and not spending more than you can afford to pay back. Basically, treat your credit card like a debit card.

Marriott Bonvoy Boundless card details

The Bonvoy Boundless earns 6x points on Marriott purchases, and 2x points on everything else. Just for being a cardholder, you get Silver Marriott status, and you also get 15 elite night credits each year to help boost you to the next status level.

Those benefits are all well and good, but it's the Boundless card's annual free night reward — which you can use at Marriott hotels that cost up to 35,000 points — that can really deliver significant value. Depending on where you use it, you could get more than $95 in value, in which case the card's annual fee pays for itself.

The Boundless is the middle-of-the-road option in the lineup of Marriott co-branded credit cards for non-business users. There's also the Marriott Bonvoy Bold, with no annual fee, and the Marriott Bonvoy Brilliant from Amex, with a $450 annual fee and lots of premium perks. The Boundless is currently offering the highest welcome bonus of the three cards — the Bold is offering 50,000 points after you spend $2,000 in the first three months, while the Brilliant is offering 75,000 points after you spend $3,000 in the first three months.

Read more: The best hotel credit cards

100,000-point sign-up bonus

The Bonvoy Boundless is one of two Marriott co-branded credit cards currently offering a welcome bonus of 100,000 points. The other card is the Marriott Bonvoy Business™ American Express® Card, which is also offering new cardholders 100,000 points after they spend $5,000 in the first three months. That card is a business credit card, though, with a $125 annual fee and 4x points on a few additional spending categories — and the 100,000-point offer is only available on the Bonvoy Business until October 23. 

There's currently no end date for the 100,000-point offer on the Bonvoy Boundless card, but it is being marketed as limited-time, so don't wait too long if you're interested.

While you can use Marriott points with airline partners, the main way to redeem them is for Marriott stays. Free nights cost 5,000 to 100,000 points depending on the hotel category (1-8) and whether you're staying during an off-peak, standard, or peak time.

Travel website The Points Guy values Marriott points at 0.8 cents apiece, so the Bonvoy Boundless card's 100,000-point sign-up bonus would be worth $800. Of course, you could get more (or less) value out of the points depending on how you use them. Make sure you do the math to see if you're getting a good redemption — just divide a hotel's cash rate by the number of points you'd need to book the same room. If you're getting 0.8 cents or more per point, you're in good shape.

Click here to learn more about the Marriott Bonvoy Boundless card.

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A UN ambassador told us why he's angry at the business world's 'show-and-tell' approach to sustainability — and then he shared an advance copy of his plan to fix that

Sat, 09/28/2019 - 11:00am

  • At the United Nations General Assembly this week, one of the main topics discussed was the urgency required for completing the Sustainable Development Goals (SDGs) by 2030.
  • UNGA's member states agreed to the SDGs in 2015 as a way to end destabilizing inequality, extreme poverty, and man-made climate change destroying ecosystems.
  • The International Chamber of Commerce sets standards of international trade, and its ambassador told Business Insider that sustainability plans presented at the UNGA will amount to nothing more than "show and tell" unless systemic changes are made.
  • The ICC has determined eight policy points affecting financial regulation that would make investing in sustainability more attractive to banks and investors. It shared them with Business Insider ahead of their publication in a detailed report shared next month at the annual meeting of the World Bank and IMF.
  • This article is part of our ongoing series on Better Capitalism.
  • Visit Business Insider's homepage for more stories.

Andrew Wilson sounded frustrated.

The parade of heads of state, business leaders, and fellow NGO reps that spoke about sustainability we had just seen at the United Nations General Assembly was something he's very familiar with, as the UN ambassador for the International Chamber of Commerce (ICC). It's the world's largest business organization, promoting international trade and regulation among its 46 million members, and has observer status at the UN. Wilson's been in the role for 18 months, and he's heard lots of talk around sustainability, but hasn't seen much progress.

He told Business Insider that the only way the UN's Sustainable Development Goals (SDGs) will be accomplished is if there are systemic policy changes, not a gradually increasing series of modest national and corporate programs, "because otherwise the UN system simply stays as a high-level week with a nice show-and-tell."

The SDGs are 17 goals for eliminating extreme inequality, poverty, and man-made climate change by 2030. The urgency comes not only from a spirit that these are the right things to do, but from the real dangers that these afflictions are posing to the long-term health of large and small nations alike. One of this week's UNGA conclusions was that the world is far off track from meeting the goals in time.

We attended the inaugural SDG Summit on Tuesday and Thursday, where the SDGs were the star of the show, and afterwards debriefed with Wilson. Wilson and his ICC colleagues may be frustrated by the lack of progress, but they're also confident that know what needs to be done.

"We need to take sustainability out of the competitive space, in general terms," said Wilson, who has been with the ICC for five years and previously worked in the British government. "We need to make sustainable business the baseline on which people operate, not a potential competitive advantage."

He shared with us a preview of the eight policy proposals the organization will be presenting at the World Bank and International Monetary Fund's annual meeting in October.

They go as follows:

Changes to capital mobilization 1. 'Broaden the scope of central bank and regulatory mandates.'

"Explore the potential to expand the concept of 'financial stability' in central bank and regulatory mandates to incorporate both sustainability-related risks and objectives. Given the growing risks posed to the global economy by climate change, environmental degradation, and global inequality, the objective of financial stability can no longer be separated from sustainable development imperatives."

2. 'Align prudential regulation frameworks with sustainability risks.'

"Explore the feasibility of including risks associated with climate and other sustainability factors in institutions' risk management policies (building on the work of the Task Force on Climate-related Financial Disclosures) — with the objective of adjusting capital requirements under Basel III/Solvency II and related regulatory frameworks to properly account for sustainability-related risks."

3. 'Establish sustainable finance taxonomies.'

"Establish a process to develop a globally consistent taxonomy for climate change, [as well as] environmentally and socially sustainable investment activities to provide a supporting factor for the calculation of regulatory capital. Such a framework could provide a basis for a recalibration of prudential requirements under Basel III/Solvency II to positively incentivize the financing of sustainable assets — similar, for instance, to the scaling approach taken for certain forms of small business financing under existing prudential regimes."

4. 'Embed sustainability in credit ratings.'

"Explore the potential for sustainability factors to be taken into account in credit rating assessments — including for sovereign debt."

What this means

Following the global financial crisis, central banks adopted new regulations intended to reduce the amount of risk banks would take. The ICC wants central banks to interpret risk differently when assessing investments in sustainability.

As Wilson said, a bank right now would be less willing to invest in an SDG-friendly solar energy development in Nigeria, a developing country, than it would be investing in a coal plant there. Investors are recognizing potential profits in sustainable industries like clean energy, but the ICC wants risk assessment adjusted to reflect the risks inherent in doing business as usual. 

Read more: 7 crucial developments from the UN's sustainability summit, and what they'll mean for businesses and our environment

Changes for consumers 5. 'Clarify fiduciary duties.'

"Establish clear duties for both institutional investors and asset managers in relation to sustainability considerations."

6. 'Standardize SDG disclosures.'

"Work towards greater standardization of sustainability-related reporting to address growing market fragmentation and promote comprehensive SDG-alignment."

7. 'Empower consumers.'

"Require sustainability preferences to be taken into account when assessing a client's needs."

What this means

Business leaders like BlackRock's Larry Fink have called for more formal ways of measuring environmental, social, and governance (ESG) criteria of securities, and that's in line with what the ICC is calling for here.

It wants an aspect of a company's health to be how it is building long-term value through investments in sustainability, and that way the market will reward them accordingly.

Read more: A survey asked 1,000 CEOs how they felt about their work on the environment, and most of them gave the same answer — not that great

Change in priorities 8. 'Unlock dormant assets.'

"Establish appropriate schemes to unlock the estimated US$100 billion of assets that lie 'dormant' where financial institutions have lost contact with their beneficial owner — building on existing good practices in a number of countries. Such assets could be earmarked towards SDG implementation nationally or on a global level."

What this means

When a personal financial account goes dormant after a specific period of time, it becomes property of the state (if the funds are subsequently requested, they are returned). In December 2016, the Japanese government decided to make use of dormant funds, which were rising at a rate of ¥100 billion ($927 million) annually, for socially beneficial causes. The program went into effect this year, and the ICC believes it could be a model for other nations.

SEE ALSO: 7 crucial developments from the UN's sustainability summit, and what they'll mean for businesses and our environment

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Divvy, a rent-to-own startup for homeowners, grabs $43 million in fresh funding — including from home-building giant Lennar

Sat, 09/28/2019 - 9:31am

Divvy, a rent-to-own home startup, said this week that it has nabbed $43 million in a Series B funding round.

A number of startups are looking to attract business by offering alternatives to taking out traditional mortgages. ZeroDown, founded by former executives at cloud HR software company Zenefits, this summer launched rent-to-own services for the San Francisco area.

The funding round for Divvy, which launched in 2017, included new investors GIC, Singapore's sovereign wealth fund which invests roughly 10% of assets into real estate, and Lennar, one of the largest homebuilders in the nation.

Divvy first started offering its service in Atlanta and Cleveland, and now operates in Memphis as well. Adena Hefets, Divvy's cofounder and CEO, told Business Insider that the company is planning to expand, but doesn't have its sights set on places like California or New York. Hefets, who cofounded the company with Brian Ma, Alex Klarfeld and Nick Clark, declined to say how many homes Divvy has purchased.

The round also included previous investors in Divvy's $10 million Series A like Andreessen Horowitz, which led a round of financing in brokerage startup Flyhomes this August, Caffeinated Capital, and Max Levchin, cofounder of Paypal and CEO and cofounder of Affirm. Divvy declined to provide valuation tied to the latest funding round.

Divvy's services are geared towards people who don't have the credit score and financial background to qualify for a traditional mortgage. Customers put down 2% of a home's value. 

"Giving them an entire mortgage was like going into the deep end, we wanted to stair-step them into owning a home," Hefets said.

Read more: Andreessen Horowitz-backed Flyhomes just snagged $141 million to expand its next-gen brokerage

Other businesses offering different alternatives to homebuying have also sprung up. Haus, founded by Uber co-founder Garrett Camp, launched in 2016 and co-invests along with the homebuyer. The buyer pays that back over time and gets their portion of equity if they choose to sell the house. Buyers in that setup are fully responsible for taxes, insurance, maintenance, and other costs. 

And on the home-seller's side, companies like Zillow, Opendoor, and Redfin have launched iBuyer programs that make cash offers for homes to allow transactions to happen quickly. A report by real estate data firm Collateral Analytics found that iBuyer fees and other costs can cost a home seller 6% to 10% of a home's sale price.

Meanwhile, the broader residential real estate industry is seeing rapid growth in upstarts that are looking to add a tech veneer to the space. Compass, which describes itself as a tech-enabled brokerage, raised $370 million in a July round of funding led by SoftBank's Vision Fund, bringing the company to a $6.4 billion valuation.

Read more: A startup that wants to be a Zillow for commercial real estate just raised $10 million in seed funding from Greycroft and leading real estate players

Five-minute application

Some rent-to-own companies have come under regulatory scrutiny in recent years. Vision Property Management, founded in 2004 and formerly one of the nation's largest rent-to-own operators, has had to grapple with lawsuits by the Attorneys General of New York and Wisconsin, and by the City of Cincinnati over claims about its business practices. In 2017, Fannie Mae stopped selling homes to Vision.

Hefets said Divvy has a different approach than older operators when we asked about the regulatory crackdown on Vision. Instead of the fees that traditional rent-to-own companies charge for the service, Divvy says it charges rent and an additional 25% that goes towards the eventual down payment.

While renting, a Divvy customer pays for preventative and seasonal maintenance, though other maintenance is provided by the company. Traditional rent-to-own companies may often charge customers for all maintenance costs.

Divvy's customers begin by completing a five-minute application with roughly the same information that is in a rental application, and the company preapproves based on a certain home value. The Divvy customer finds their house through a real estate agent, and then Divvy purchases the home on their behalf. Traditional rent-to-own companies typically already own homes for customers to rent.  

See more: Meet the 7 early-stage startups blending tech and real estate that just got accepted to a high-profile accelerator. One is a TaskRabbit-like app for construction workers.

Divvy owns the home for three years, at which point a customer can either choose to move, or to purchase the house outright from the company for a predetermined price.

A customer's home equity can either be rolled into the purchase of the home, or is paid out in full if the customer decides not to buy the home. If a customer can't make a payment or follow a payment plan, the Divvy keeps half the equity and tries to match the home with another potential buyer. 

Join the conversation about this story »

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How WeWork spiraled from a $47 billion valuation to talk of bankruptcy in just 6 weeks

Sat, 09/28/2019 - 9:29am

  • Just six weeks ago, co-working giant WeWork was the nation's most valuable tech start-up.
  • Then it filed its S-1 registration for an initial public offering, disclosing a bevy of conflicts of interest and mismanagement by its magnetic and eccentric co-founder, Adam Neumann.
  • Investors, reporters, and analysts, chastened after seeing Theranos revealed as a massive fraud and watching Uber fail to live up to the hype, didn't let another visionary founder pull the wool over their eyes.
  • Neumann's IPO dreams crashed and burned, and now he's been ousted as CEO and observers are wondering if WeWork can avoid bankruptcy.
  • Based on reporting from Business Insider and other news outlets, this is the story of the six weeks that almost ended WeWork.

At 7:12 on a mild late-summer morning in New York City, WeWork's registration papers hit the Securities and Exchange Commission's website. The filing, called an S-1, was expected. It was a crucial step in what had been up to that point an exquisitely choreographed march toward an initial public offering for the tech world's most highly valued start-up.

With its stratospheric $47 billion valuation and preposterously ambitious founder and CEO, Adam Neumann — his goal wasn't merely to make money, or rent office space, he claimed, but to "change the world" — WeWork had become a glaring symbol of Silicon Valley's boundless audacity and self-professed exemption from the laws of economics.

In the early morning light, thousands of investors and journalists would get their first real peek at the company's financial condition and be able to judge for themselves whether WeWork was really, as its founder claimed, on a path toward galactic dominance and unimaginable profit.  

Almost immediately, all hell broke loose. A steady stream of rapid-fire headlines detailed Neumann's self-dealing, mismanagement, and bizarre behavior. Within 33 days the offering was scuttled, WeWork's valuation plummeted 70% or more, and Neumann, who believed he would become the world's first trillionaire, was ousted as CEO.What was supposed to be Neumann's coronation as a visionary became one of the most catastrophically bungled attempted debuts in business history.

Read more: WeWork's board just ousted Adam Neumann as CEO — here's who the key players are

It wasn't supposed to be this way. WeWork was a unicorn, a near-invincible powerhouse flush with venture capital. The most brilliant minds in Silicon Valley and the most powerful global investors had shovelled billions of dollars into its coffers — how could it be anything but a sure bet? Validation from public market investors was a mere formality.

But two things had changed in the nine years since Neumann began constructing the myth of WeWork with the help of starry-eyed tech journalists and hungry investors: Theranos and Uber. In the fall of Theranos, the investing public saw how a multi-billion-dollar alleged fraud could be spun up from Silicon Valley bromides and the image of an idiosyncratic, enigmatic founder who inspired cult-like devotion. In Uber, they saw how machismo, hubris, and accounting tricks could obscure fundamental business challenges.

Unfortunately for Neumann, it was precisely the wrong time to be the visionary leader of a company with imperial dreams and obscure finances. Patience had run out.

This account of the six-week period since that August 14 filing is based on Business Insider's own reporting, as well as that of the Wall Street Journal, Financial Times, New York Times, Bloomberg, New York magazine, Vanity Fair, and other publications. 

Tech-bro mysticism, grueling hours, and Don Julio Tequila

Neumann, a 40-year-old Israeli Navy veteran, is known for his signature look of long unkempt hair above a t-shirt and jeans and bold pronouncements bordering on the bizarre ("On the one hand, community," he once told New York magazine, describing his simultaneous desire for social cohesion and cut-throat competition. "On the other hand, you eat what you kill.")

He spent time on a kibbutz, and has described his early life as troubled. His parents divorced when he was seven, and he moved 13 times as a kid and into his teens, according to a Reuters profile. He moved to New York in 2001, when he was 22, to live with his sister, a model, in Tribeca. He attended business school, "hit on every girl in the city," and built failed businesses around collapsible women's high-heeled shoes and baby clothes with knee pads ("Krawlers").

WeWork, which now has 12,500 employees, had always been a little different. Neumann founded it in 2010 with Miguel McKelvey, who was raised on an Oregon commune. The bulk of the firm's business is in renting out space in buildings, then sprucing it up and parceling out smaller chunks to freelancers, startups, and other businesses for shorter time frames. While WeWork typically takes out 15-year leases, some of its customers can move out in a month.

It often seemed like a real estate company posing as a higher plane of consciousness. Together with his wife Rebekah, a devout follower of Kabbalah and a cousin of Gwyneth Paltrow, Neumann cultivated a sort of tech-bro mysticism, combining grueling hours and always-on expectations with a free flow of alcohol and hippie wisdom. Rebekah started a private elementary school and played up WeWork's community of tenant-workers. 

Adam walked around the office barefoot. He once decreed that no one should eat meat in the office or purchase it on company expense accounts. He also partied hard: Neumann was known for drinking Don Julio 1942, the $149-a-bottle tequila. And he smoked marijuana in the office, at his various homes, and elsewhere, people who'd seen him smoke it told Business Insider. 

The trappings of success

The trappings of success soon followed. In recent years, Neumann purchased at least five five homes, including a $10.5 million Greenwich Village townhouse, another in the Hamptons and yet another, a 60-acre estate, north of New York City. In 2017, he spent $35 million to buy four apartments in the same building in the tony Manhattan neighborhood of Gramercy Park. He purchased a $60 million Gulfstream jet for WeWork, which flew around the globe to London, Panama, the Dominican Republic, Tokyo, Hong Kong, and Hawaii, among other locations. Neumann's successors are moving to sell it.

The company's prospectus reflected the Neumanns' eccentricities. It opened with a dramatic pronouncement: "We are a community company committed to maximum global impact. Our mission is to elevate the world's consciousness." The inside cover carried a dedication to "the energy of we – greater than any of us but inside all of us." It included a commitment from the Neumanns to donate $1 billion in cash and stock — wealth they hadn't earned yet — to charity, as well as a pledge to save 20 million acres of rain forest.

Rebekah Neumann wielded significant influence over the language in the filing — internally referred to by the codename "Project Wingspan" — according to two sources with knowledge of the process. It listed the company's underwriters in a circle instead of the customary pecking order. Months earlier, they'd changed the company's name from WeWork to just We, to better communicate the enormity of their ambitions. An earlier version of the prospectus listed a series of competitive advantages under the heading "Our Superpowers."

If the WeWork IPO was supposed to be a validation of Neumann's grand spiritual plan, for his sponsor and largest backer Masayoshi Son, the CEO of Japanese conglomerate SoftBank, it would vindicate his controversial strategy of plowing billions of dollars into promising startups and pushing them to spend gobs of money to dominate their market. Son was out fundraising, even as some of his biggest investments, like the ride-sharing firm Uber, had failed to live up to expectations. This would be the stamp of approval he sorely needed. 

Son and Neumann had met for less than 30 minutes back in 2016 before Son decided to invest in WeWork. He would eventually pledge $10.7 billion, either from SoftBank's coffers or those of a separate vehicle established by Son called the Vision Fund, which raised $100 billion from backers including Saudi Arabia. After those investors balked at putting in any more money (Vanity Fair reported that Neumann arrived late and appeared hungover for an investor meeting), it was SoftBank's $2 billion investment round in January 2019 that secured the WeWork's most recent $47 billion valuation. 

Bankers and investors had also bought into the hype. JPMorgan Chase and Goldman Sachs were running the IPO, after dangling potential market caps as high as $63 billion and $96 billion, respectively.

Representatives for Neumann, WeWork, JPMorgan Chase, and Goldman Sachs declined to comment for the record for this story. A spokesperson for Softbank did not immediately respond.

"We have a history of losses"

Trouble began almost as soon as the 359-page S-1 filing hit the internet. Investors, analysts, and journalists began digging in, and they didn't like what they found: a laundry list of potential conflicts between Neumann and the company, a byzantine corporate structure, and losses that were growing even as revenue doubled. The company didn't explain how it would become profitable. The section disclosing risks to investors ran to almost 30 pages. 

The potential conflicts were astounding: Neumann owned an interest in four buildings that WeWork leases. He'd gotten personal loans from the company at below-market rates to fund his lavish lifestyle. One, for $362 million, was connected to an early exercise of stock options (and has since been repaid). He had a $500 million line of credit secured by his shares. Perhaps most alarmingly, he had purchased the trademark to the "We" name through a holding company, and WeWork paid him $5.9 million to license it. "Related party" citations in the prospectus — disclosures that the company was doing business that could enrich an employee, director, or officer — numbered more than 100. 

Read more: WeWork details CEO Adam Neumann's web of loans, real-estate deals, and family involvement with the company

He'd also used company money to fund what looked like pet projects, including several entities linked to Neumann's love of surfing. It led a $32 million investment into surfer Laird Hamilton's startup, Laird Superfood, and sunk $14 million into Wavegarden, a company that makes surfing-wave pools. 

Neumann had near total control. WeWork would have three classes of stock, including two that awarded Neumann 20 votes for each share. Upon death, his wife would have the power to name a new CEO, independently of the board.

But perhaps what made WeWork different is the apparent problems with the company's business model. It was on the hook for $47 billion in future lease payments to building owners, while only having committed revenue of $4 billion. Last year's loss jumped to $1.9 billion on revenue of $1.8 billion — for every dollar it made, it was spending two. For the first half of this year, losses climbed to $904 million even as revenue doubled to $1.54 billion. The company also used a made-up metric that it called "contribution margin" — renamed from the "community-adjusted Ebitda" that was much maligned earlier in the year — that made it harder to understand how the underlying business was performing. 

"We have a history of losses and, especially if we continue to grow at an accelerated rate, we may be unable to achieve profitability at a company level," the firm said in its filing, "for the foreseeable future."

Read more: WeWork might be painting itself as a tech company, but it's facing a bunch of old-school real estate worries

It was a lot to take in. By the end of that day, both the Financial Times and the Wall Street Journal were suggesting that the company might have to reduce its valuation to attract interest. Analysts quickly joined the fray, with Fitch Ratings moving that day to downgrade the company lower into junk territory over its profligate spending, among other factors. 

If that weren't enough, Neumann got another bad omen: Faraday Grid, a UK-based startup looking to build new power transformers into which Neumann had invested 25 million pounds earlier this year, filed for bankruptcy

It was less than 24 hours since the company's filing had been made public.

"A masterpiece of obfuscation"

Triton Research's Rett Wallace would later call the prospectus a "masterpiece of obfuscation." 

NYU marketing professor Scott Galloway wrote a take down of the company titled "WeWTF." John Coffee, a Columbia University professor and director of the university's corporate governance center, told the Financial Times that to navigate past investor concerns about the company's structure, market volatility, and a tougher climate for IPOs, Neumann would have to "go through an ordeal of fire." 

While some of the company's advisers were surprised at the speed and depth of the negative reaction, according to a person familiar with their thoughts, WeWork execs remained bullish on the company's prospects throughout that week and into the summer weekend. WeWork's bonds rallied by more than 3% on hopes that the IPO would pay off.

But the brutal headlines kept coming: On Monday, Aug. 19, the Financial Times editorial board blasted WeWork and Neumann for the lock he kept on the company under the title, "Beware the dead hand of the controlling founder." In the New York Times, Kara Swisher asked, "WeWork: Is there any there there?" Another FT op-ed led with "WeWork's magical thinking disguises a flawed model."

"Hype is one of the tech sector's most magical qualities," wrote Elaine Moore in the FT. "Like Uber and Lyft, no one can say for sure whether its business actually works." 

The company's advisers continued to survey investors, trying to drum up support for an IPO they hoped would raise at least $3 billion. They weren't getting a positive reception. Shortly after 4 p.m. on Monday, August 26, Neumann hopped on the WeWork Gulfstream for a 13-hour redeye flight over the arctic to Tokyo to speak with SoftBank investors about the state of the IPO.

The discussion centered on two possible options — whether SoftBank would be a big buyer of shares in the IPO, which would be hotly debated for weeks after, or if the Japanese conglomerate might inject a new slug of operating cash so WeWork could delay the offering. 

The talks ignited a long-simmering difference of opinion within SoftBank, where some execs had argued against investing any more money into the company. Son, however, remained committed to Neumann and his vision. And he held considerable sway. Neumann needed the money — $9 billion in IPO proceeds and bank debt — to fuel his continuing global ambitions. 

A humiliating comedown

But by early September, something had to give. WeWork's bankers weren't having any luck drumming up enough support for the IPO, hearing from investors concerned about signs of Neumann's self-dealing and skepticism about the business model.

On Wednesday, September 4, the retrenchment began. Neumann agreed to return the $5.9 million payment he had gotten from WeWork for the rights to use the trademarked term "We." The company also announced that Frances Frei, a Harvard professor and adviser to the company since March, would join the board, responding to criticism about its lack of a single woman. Newspapers reported the company was preparing to kick off its IPO roadshow as soon as the following week.

But the next day, another drumbeat of negative news about valuation flooded the media. While some had suggested early on that the company's lofty valuation might need to be trimmed, things had gone quiet as advisers canvassed investors. No more. 

Numerous outlets reported the company was considering selling shares at 50% of its most recent private valuation, or $20 billion to $30 billion. Yet some company insiders still hoped to be able to get something in the $25 billion to $30 billion range. 

It was a humiliating comedown from the hype that had followed the company and Neumann for years. Any lower and WeWork would be forced to wear the ignominious crown of Silicon Valley's biggest ever public down round. 

The reasons for the knockdown were well publicized, though members of WeWork's camp tried mightily to paint it as a prudent step: The FT said the firm's underwriters were worried about listing the company at too high a valuation and risking a repeat of what happened with Uber, which has fallen about 33 percent since its debut. 

Desperately trying to keep the IPO on track

By Sunday, Sept. 8, the company was now considering a valuation below the $20 billion that had been floated just days before. WeWork had been planning to begin its roadshow the following day, and yet the company and its advisers were still holding meetings to see what they could do to drum up more demand. 

By Monday, if not before, SoftBank decided it had seen enough. Executives at the conglomerate and its $100 billion Vision Fund were pushing Neumann to abandon the IPO. 

For SoftBank, it was a stunning reversal. After plowing more than $10 billion into the company, and taking a 29% stake, the firm and its leader, Son, needed a big win. Yet it couldn't stomach a public-market valuation just one-third of the private value it had given WeWork as recently as January. 

By Thursday, Sept. 12, WeWork was considering reducing Neumann's voting power from 20 votes per share to 10 votes in an effort to win over investors. Neumann was "desperately" trying to keep the IPO on track. WeWork canceled a planned town hall. 

Friday was a big day. WeWork was hoping to begin its roadshow the following week, and it made another attempt to woo investors with corporate governance changes. The company publicly announced changes that day, taking the steps the FT previewed, and made a number of other changes at the same time. The company cited "market feedback" for the adjustments, and said no member of Neumann's family would sit on the board. The plan for Rebekah to choose a successor in the event of Adam Neumann's death was also scrapped, and the filing said the board had the ability to remove the CEO.

Reuters reported the company was looking at a valuation of $10 billion to $12 billion. That would value the company at less than the $12.8 billion in total equity it raised during its nine years of operations. 

Neumann remained committed to going forward with the IPO, hoping to complete the listing before Rosh Hashanah, so he could observe the Jewish high holy days. In talks earlier that week with Softbank, the CEO said he didn't expect any changes over the coming 12 months and what he really needed was more cash to fund his plans for expansion. Neumann was also counting on a $6 billion loan that his bankers would give to WeWork — but only if he successfully raised at least $3 billion in the IPO. Later that Friday, the firm announced plans to list on the Nasdaq.

The interplay between Neumann and his advisers was fraught throughout the process, according to people familiar with the matter. The CEO resisted some of his advisers' suggested changes to the IPO filing, particularly around the control and voting structures, one of the people said. And JPMorgan insisted on disclosing some of the related-party transactions that would later prompt the investor backlash. Neumann wasn't even listening to his largest sponsor, SoftBank, who wanted to shelve the IPO. 

He plowed ahead, and SoftBank had little choice but to go along with the plans of the man they had invested so heavily in. By Friday afternoon, news reports suggested that SoftBank was prepared to act as the anchor investor in the IPO, purchasing at least $750 million in shares in the offering.

Heading into the weekend, WeWork, SoftBank, and its advisers were hoping that the corporate governance changes, valuation markdowns, and pledge of SoftBank support would be enough to launch the long-awaited roadshow. 

It would be some of the longest 48 hours of Adam Neumann's life. 

A bombshell hits

By Monday, instead of starting the roadshow, WeWork announced plans to postpone the listing until after the Jewish holidays. Even with Softbank's anchor investment, the company and its advisers had decided it would still raise less than the $3 billion it needed to unlock the $6 billion loan that it needed to keep operating.

The company issued a terse statement that said it looked forward to completing the IPO by the end of the year. Any further delay beyond that, and the clock would run out on the terms of the loan, which would have to be renegotiated. 

The day after shelving the IPO, Neumann admitted in an internal webcast to being humbled. It was a new low for the founder. He now realized, he told his employees, that the skills he'd developed to run a private company would need to be adapted to running a public corporation. By this point, members of the board had begun thinking about how they could force him to resign, according to multiple reports. 

Shortly after noon, the bombshell hit. 

The Wall Street Journal's Eliot Brown dropped a 2864-word, deeply reported article detailing Neumann's frequent marijuana use and propensity to drink shots of Tequila. The newspaper told of a flight to Israel in which the owner of the jet recalled it after finding marijuana in the cabin. And of a layoffs discussion followed with tequila shots and a performance by a member of Run-DMC. 

The article was a turning point in how his investors and employees saw him, according to a person with knowledge of those views. In the coverage that followed across news organizations, the CEO's marijuana use would be frequently mentioned.

Sliding toward possible bankruptcy

That was it. By Sunday, Softbank was pushing to unseat Neumann. Faced with allegations of drug use, erratic behavior, and earlier defiance in pursuing the IPO even after his largest investor cautioned patience, Softbank had lost faith. Some large investors had said they wouldn't invest unless the company brought in a more experienced executive. Several investors even thought of threatening the CEO with legal steps related to his self-dealing. A board meeting was scheduled for later in the week. 

Read more: JPMorgan's Jamie Dimon met with WeWork's Adam Neumann this weekend to hash out how to get its botched IPO back on track

That Sunday, Neumann sat down with JPMorgan CEO Jamie Dimon, whom he liked to call his personal banker. Like the consigliere J. Pierpont Morgan a century before, Dimon found himself in the midst of the biggest corporate story of the moment. The two men discussed what could be done to get the delayed IPO back on track, Business Insider first reported. Dimon also brokered talks with Neumann's advisers over the course of two days at the bank's midtown headquarters, a person familiar with them said. 

Dimon was more than a neutral ear. In addition to serving as the bank's top IPO adviser, JPMorgan has lent hundreds of millions of dollars to Neumann. WeWork disclosed Neumann's $500 million personal line of credit from JPMorgan, UBS, and Credit Suisse, $380 million of which had been drawn down. The CEO had another $98 million from JPMorgan in the form of mortgages and other loans. WeWork was part of Dimon's plan to supplant the duopoly of Goldman Sachs and Morgan Stanley running tech's hottest IPOs. 

Later that Sunday, Neumann had dinner with Bruce Dunlevie, one of WeWork's oldest directors and a partner at investor Benchmark Capital, to discuss his options. Dunlevie and Dimon had been supporting Neumann's desire to remain as CEO, but no more: Dunlevie broke the news to Neumann at that dinner that he was siding with SoftBank. He wanted Neumann out. A spokesperson for Benchmark Capital declined to comment.

On Tuesday, September 24, as Neumann's fate hung in the balance, WeWork's board assembled at JPMorgan's Madison Avenue headquarters. The octagonal building found itself at the center of corporate America's biggest debacle once again after hosting last-ditch efforts to salvage Bear Stearns before the 2008 financial crisis hit its nadir. On floors that towered over the Grand Central Terminal, WeWork's board met for hours to discuss what to do. By the time they emerged from the skyscraper's granite walls, Neumann had been voted out. In the end, Neumann voted against himself.  

He would step down and become nonexecutive chairman. He had lost control of the company and watched his voting power reduced to 3 votes per share, giving him a minority of votes. He can only nominate a minority of directors. 

In a statement, Neumann told employees that "since the announcement of our IPO, too much of the focus has been placed on me." 

Read more: Adam Neumann is out as WeWork's CEO, but that's no 'silver bullet': VCs and proptech experts think it will take cutting passion projects and cleaning house to right the ship

The board named WeWork executives Sebastian Gunningham and Artie Minson to replace Neumann, and the company began considering such unthinkable options such as slowing its growth, cutting thousands of employees to focus on its core business of renting office space, and getting rid of side businesses such as Rebekah's school to control costs and — perhaps — restore investor confidence. When asked recently to respond to concerns about its business model, the company said it intends to fully honor its lease commitments.

The company began to formalize talks for a renegotiated loan of about $3 billion, which was expected to require the raising of additional equity.

The Economist publicly wondered whether anything could be done to halt "WeWork's slide toward possible bankruptcy."

By Thursday, SoftBank was talking about another injection of $1 billion.

Additional reporting by Meghan Morris, J.K. Trotter, Meredith Mazzilli

Join the conversation about this story »

NOW WATCH: 7 lesser-known benefits of Amazon Prime

FREE SLIDE DECK: The Future of Fintech

Sat, 09/28/2019 - 9:02am

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

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

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

Join the conversation about this story »

An $18 million townhouse with its own carriage house is the most expensive home for sale in Brooklyn — here's a look inside

Sat, 09/28/2019 - 8:53am

A five-story, $18 million townhouse in Brooklyn is the most expensive home for sale in the borough, StreetEasy confirmed to Business Insider.

The 8,500-square-foot, two-family home is located on Remsen Street in Brooklyn Heights, a historic neighborhood in New York City known for its high price tags and stunning brownstones

According to Brownstoner, in 2008, the townhome sold for $10.8 million. That price made it, at the time, the most expensive home ever sold in the neighborhood, as well as one of the priciest residential properties ever sold in the borough.

Read more: The Brooklyn Nets' Spencer Dinwiddie may have just dropped over $3 million on the highest penthouse in Brooklyn — here's a look inside

According to the listing website, the five-story home is broken up into different living spaces. There is a four-floor main residence, plus a separate one-bedroom, garden-level unit. There's also a one-bedroom carriage house that sits behind the townhouse.

Keep reading for a look inside. 

SEE ALSO: The monthly median rent for a studio in Manhattan this summer hit an astonishing 11-year high, and the city's prices are driving people away in droves

DON'T MISS: New York City is home to one of the country's most expensive rental markets — and as of July, rent in Brooklyn peaked at an all-time high for the 2nd month in a row

The most expensive home for sale in Brooklyn right now is an $18 million, five-story townhouse located in Brooklyn Heights.

Source: StreetEasy



Brooklyn Heights is a historic neighborhood in New York City known for its high price tags and stunning brownstones. According to Zillow, as of August, the neighborhood's median home value was $1,736,600.

Source: Vogue, Zillow



This isn't the first time the townhouse has set a record. According to a report by Brownstoner, the home was sold for $10.8 million in 2008. It was the most expensive home ever sold in the neighborhood at the time.

Source: Curbed, Brownstoner



The five-story home, according to Curbed, dates back to the 19th century.

Source: Curbed



Currently, it is broken up into different living sections.

Source: Brown Harris Stevens



The main house consists of the top four floors and boasts five bedrooms and seven bathrooms. In addition to the four floors, there is a one-bedroom, garden-level unit that leads out to the back garden.

Source: Brown Harris Stevens



Here's a close-up of the main kitchen ...

Source: Brown Harris Stevens



... and of one of the bedrooms.

Source: Brown Harris Stevens



The main house also includes a large study, which is located on the fifth floor.

Source: Brown Harris Stevens



Down in the basement, there is a pool table, a foosball table, and a jukebox.

Source: Brown Harris Stevens



And, on the top of the townhouse, residents have access to a large rooftop deck.

Source: Brown Harris Stevens



Behind the townhouse and through the garden is a one-bedroom carriage house, which is also included in the purchase. The middle level of the home serves as a garage, while the top level is a one-bedroom unit with an open kitchen.

Source: Brown Harris Stevens



There is even a lower level which includes another living area and a half bath.

Behind the lower-level living area is a glass-enclosed rain shower.

Here's a close up of the glass-enclosed rain shower.

Over the past few years, Brooklyn has been catching up to Manhattan's pricey real-estate deals. Just consider actor Matt Damon who, as reported by Variety, shelled out over $16 million for a penthouse in Brooklyn Heights in December of 2018. The purchase, according to StreetEasy, won the title of the highest recorded price ever paid for a home in Brooklyn.

However, the title may not be Damon's for long.

In October 2018, Business Insider reported that a $20 million penthouse at Quay Tower, also located in Brooklyn Heights, went into contract. However, the status of that penthouse is still unknown.

Business Insider reached out to the listing agents for an update on the deal but did not immediately get a response.



A health system hidden in the heart of Pennsylvania thinks it's cracked the code on caring for seniors. And it could be the future of healthcare.

Sat, 09/28/2019 - 8:45am

  • Geisinger, a health system based in central Pennsylvania, is investing heavily in the basic care it provides, starting with seniors.
  • The hope is that by focusing on primary care and prevention, the health system, which also runs a health plan, could keep more people healthier and out of the hospital.
  • Geisinger's efforts to care for an aging population are a preview of the challenges that the US as a whole will face in the coming decades.
  • Click here for more BI Prime stories.

Mark Walters, a 69-year-0ld retired elementary-school teacher in Kingston, Pennsylvania, watched as a medical clinic on Wyoming Avenue was torn down and put back together over the course of seven months.

At the end of the construction emerged 65 Forward, a new kind of health clinic from Geisinger, a nonprofit health system headquartered in Danville, Pennsylvania. When his wife received a postcard about 65 Forward in the mail, the couple decided to check it out.

"This is a totally different concept," Walters said.

The clinic is at the leading edge of a big bet from the 11-hospital Geisinger system that it can take care of seniors in central Pennsylvania by letting doctors spend more time with them and by offering activities and snacks that turn the traditional doctor's office into a community center. 

Geisinger's efforts to care for an aging population provide something of a preview for the challenges that the US as a whole will face in the coming decades. In the 38 counties where the system operates in Pennsylvania, 19.6% of the population is already 65 or older. The system projects that'll rise to 21.9% in half a decade.

The US will cross the 20% mark about 2030, Census Bureau data shows.

"Leveraging primary care to coordinate care for the elderly is something that's needed everywhere," Robert Field, a professor of health management and policy at Drexel University, said. "If they can pioneer effective approaches, then it's widely adaptable."

Caring for seniors as the US ages

The health system is placing more of an emphasis on new ways to care for its seniors as Pennsylvania's 65-and-older population grows at a faster rate.

In addition to the clinics and a related primary-care redesign, Geisinger is building up its ability to take care of seniors in their homes and even investing in food pantries. Overhauling the clinic on Wyoming Avenue cost about $3 million, and Geisinger said it plans to invest millions more in its primary-care efforts.

"If you look at where can we make the biggest impact in the health of our communities, it's in primary care," the health system's CEO, Jaewon Ryu, MD, said. "And it's especially true as people age."

The approach is aided by the fact that Geisinger is more than a health system. The company also operates an insurance plan, which covers many of the elderly patients Geisinger will see in the clinic. That gives the system a direct financial reason to try to keep those patients healthy and out of the hospital, investing in preventive services instead.

Patients don't have to have Geisinger's insurance to join 65 Forward, but a system executive said the hope is to get them transitioned to Geisinger's insurance plans so that the clinic can cover more services in a more integrated way.

In all, Geisinger's health plan has more than 550,000 members, and the health system cares for more than a million patients a year.

Read more: Big hospital systems are borrowing an 80-year-old idea to keep patients healthy and cut costs, and it could be the future of healthcare

Geisinger's plan for its senior-focused 65 Forward clinics

The Kingston primary-care clinic is the first for Geisinger, which plans to open 15 locations over the next year and another 15 after that.

From conception to launch, the project took about 15 months, Juli Molecavage, associate vice president of quality and primary-care services at Geisinger told Business Insider. The first clinic was a $3 million investment from Geisinger

Walking in, patients are greeted by a check-in desk and then directed to the lobby, which has with coffee, snacks, and an artificial fireplace. The ambiance is more hotel lobby than medical waiting room.

Across the hall are workout machines in a bustling community room where Walters had just attended a weekly balance class. Behind a set of doors lie exam rooms and a common area where doctors, nurses, and other healthcare professionals work while in between patients.

Patients like Walters can go to the center for primary-care visits, in addition to getting X-rays and lab work. Down the road Geisinger will offer visits with specialists either in person or via virtual visits on large-screen TVs in the exam rooms.

The new clinics are modeled on the concierge-care models that Ryu, Geisinger's CEO, has seen in places like the Bay Area but won't charge extra fees. 

"When you're 65 and older, all things being equal, you tend to have more chronic disease, and the one-size-fits-all approach of primary care just doesn't work," Ryu said.

Read more: A new kind of doctor's office charges a monthly fee and doesn't take insurance

Doctors will care for about 450 patients each, a much smaller number than in Geisinger's other clinics.

For James Tricarico, the first doctor to join the new clinic, that's just a fraction of patients he used to see at Geisinger's Pittston location. There, he estimates he was managing the health of more than 2,000 patients a year.

"This has been a world of difference," Tricarico said. He finds that the smaller patient load keeps him from losing touch with patients for months before having to catch up at the next visit.

Instead, Tricarico can call or message patients directly, or catch up more frequently with the other caregivers in the office to hear how patients are doing. He's also got the time to bring them in for more frequent follow-up visits.

Tricarico said he was drawn to 65 Forward because it reminded him of what he'd been able to do when he had his own independent practice before joining Geisinger. When the first location ended up being in his back yard, he jumped at the chance to join.

The Kingston location has added a second doctor, who starts in October and will also be able to take on up to 450 patients.

Building a doctor's office that patients want to go to, even when they don't have an appointment

The 65 Forward locations are also designed to serve as community centers for seniors, hosting educational sessions, bridge leagues, and knitting groups. On the day Business Insider visited, a weekly fitness class was underway.

Walters said once he and his wife came in for a visit, the two spent an hour talking to Tricarico and were told they were welcome to come by any time they felt lonely. They also took advantage of the 90-minute fitness class offered by 65 Forward. He's been a member of the new clinic for about four weeks. 

"You feel good," Walters said. "You come here and you don't feel like you're really rushed."

Since joining, Walters has started spreading the word to neighbors and at his church. 

The idea also draws on what primary-care companies have been building. Over the past few years, models like venture-backed Iora Health, family-owned ChenMed, and private-equity-backed Oak Street Health have picked up steam in their approaches to caring for elderly Americans, boosted by the growth of private Medicare plans.

Read more: Meet the 8 companies changing how doctors get paid and building the future of medicine

Why a hospital system is investing in keeping patients out of the hospital

Beyond 65 Forward, the system had been looking at team approaches to primary care for years. That accelerated about three years ago, when the health system introduced a program called "Primary Care Redesign." The new model applies to most of Geisinger's clinics today.

That included defining panel sizes (keeping them between 1,900 and 2,000 patients per doctor), setting up care teams within practices, and giving doctors longer to meet with patients.

Some health systems have long emphasized primary care as a way to keep patients healthy at a lower cost. Kaiser Permanente, for instance, traces its roots to arrangements struck between industrial companies and hospitals in the 1930s and '40s to cover care for workers at a set monthly rate. The company's strategy is a favorite of Berkshire Hathaway Vice Chairman Charlie Munger and others who see it as a model for the future of healthcare in the US.

But for the most part, health systems aren't clamoring to invest heavily in primary-care or preventive services.

"Not everybody in the industry believes that that's true," Ryu said. For them, he said, it's hard to understand why services like a Fresh Food Farmacy — where those who are food insecure can pick up groceries in a space run by Geisinger — and at-home services would be included in the plan, rather than provided for by a philanthropic arm. "I think you've got to believe that that actually has a return."

For instance, in the company's Geisinger At Home program, Ryu said it's seen hospital admissions drop 40 to 45% since the program started a year and a half ago. The program is available to members enrolled in Geisinger's Medicare Advantage health plan. 

Ryu is hoping other health systems and doctors around the US will take note of the investment Geisinger's making in primary care. 

"We want this to be the mecca for anything primary care and value-based," Ryu said. "What we're creating here is a place where if you haven't gone and checked it out or if you haven't gone and spent time at Geisinger, then you haven't gone to the mecca."

Join the conversation about this story »

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In 10 years, Tesla has gone from a one-car company to being compared with Porsche — here's why that's incredible (TSLA)

Sat, 09/28/2019 - 8:38am

  • A decade ago, Tesla was selling one car, the original Roadster, and barely staying in business.
  • Porsche has been around for over 80 years and is a motoring legend.
  • But in just 10 years, Tesla's cars are routinely compared with Porsche's first all-electric effort, the Taycan.
  • That's absolutely stunning.
  • Visit Business Insider's homepage for more stories.

Porsche officially launched its first all-electric vehicle, the Taycan. The car has been much-anticipated, and invariably has also been compared with Tesla's offerings. You've seen the headlines: "Tesla Killer" and so on.

The German automaker put together some early media drives in Norway, and so far the reviewers have been impressed if not staggered by the devout Porsche-ness of the Taycan.

But they've also done what they've had to do, which is bring up Tesla as the Taycan's precursor and chief competitor.

In The Wall Street Journal, the redoubtable Dan Neil enthused over the Taycan Turbo (there's also a faster and more expensive Turbo S, and no, the Taycan doesn't have turbocharged electric motors — that's just how Porsche ranks its vehicles within the brand's nomenclature). But Neil had to bring up the supercar-fast Tesla Model S P100D and label it the EV champ that the Taycan is taking on.

Read more: In the battle of the Tesla Model S and the Porsche Taycan, it's really no contest

Maybe this seems perfectly natural, if all you know of the automotive realm is Tesla and Toyota. Cars are cars. A-to-B machines. Most run on gas. Tesla's run on electrons. You're aware of this at least.

The King of Petrolandia

But in the land of petrol, Porsche is a king — and arguably the finest car maker on the planet. The 911 sports car has been in production since the 1960s and is considered by many if not most to be the best go-fast ride that money can buy. Meanwhile, Porsche basically invented the luxury sport SUV market in the early 2000s with the stunningly good Cayenne. The Panamera sedan has its detractors, but there's no debating the cumulative impact of the Porsche portfolio: the profit margins are the envy of the industry.

Sports cars are irrational; just ask anybody who has ever owned a Ferrari. But Porsche captures hearts and minds. It might lack the overtly flamboyant fizz of a Lamborghini, but a Porsche is probably the car you'd choose if you had to drive for your life.

Enter Tesla, which has existed for about 15 years (Porsche has been around for 88). When Elon Musk's company started out, it was selling a single car, and not very many of them: the original Roadster, with volumes in three-digit territory. It was an undeniably cool car, but it was a curiosity. 

Matters got more serious in 2012, when the clean-sheet-design Model S sedan arrived. But still, Tesla has been seriously manufacturing its own vehicles for about ten years. If you round up.

For comparison, cars such as the Ford Mustang (born in 1965) and the Chevy Corvette (born in 1953) have established Porsche-beating credibility in just their most recent iterations, when Ford and Chevy decided that they should be capable of challenging Europe's best.

See also: Apply here to attend IGNITION: Transportation, an event focused on the future of transportation, in San Francisco on October 22.

The car business isn't hard — it's impossible

Ask anybody in the car business if the business is hard and they'll look at you as if you had a second head. It isn't hard. It's impossible. The destiny of aspiring car makers, almost uniformly, is to fail. See Tucker. See Fisker. Even relative legends struggle: Aston Martin has gone bankrupt seven times. 

Tesla hasn't just not gone bankrupt (despite being close in 2008) — it's become Porsche's biggest rival for the future of driving, at least according to some.

I actually don't think Tesla and Porsche are rivals in any meaningful sense. But there's no avoiding the discourse. When the word "Taycan" is uttered these days, the world "Tesla" typically follows.

Remarkable. 

Generally speaking, it's possible for niche players to steal mindshare from industry icons. Since 1992, Horacio Pagani has built his eponymous exotic nameplate into a brand that's talked about as a modern-day Ferrari or Lamborghini — and in the estimation of some pundits, builds more compelling cars. Likewise Sweden's Koenigsegg, founded in 1994.

But those guys make bonkers supercars that sell in minuscule quantities and cost lots and lots of money. Tesla, meanwhile, isn't simply aiming to top vehicles such as the $100,000-plus Taycan with the $100,000-plus Model S trims; it also wants to take on Porsche's parent, the VW Group, in the mass-market.

In that, success has been mixed. The relatively new Model 3 endured a fraught debut, but it did help the company to sell nearly 250,000 vehicles in 2018, a record. Tesla now dominates the EV market worldwide (don't get too excited — the worldwide EV market is tiny). Managing the situation is Tesla main concern. And that makes the reflexive Porsche comparos all the more remarkable. Because Porsche cares not one bit about the mass market. You settle for a Corolla. But you dream of a 911.

Or perhaps a Taycan. 

That's Tesla. In 2009, a one-car company. In 2019, a worthy opponent for Porsche. Tesla has indeed come a long way, baby. And probably more than that.

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I work for myself, save 50% of my income, and still have money left over to travel. Here's how it breaks down.

Sat, 09/28/2019 - 8:15am

  • Four years ago, I quit my job to travel for as long as my meager savings would last me.
  • I now live in Costa Rica nearly full-time and am on track to make $85,000 from freelance writing this year.
  • I'm able to save 50% of my income because I control my three biggest expenses: housing, transportation, and food. I spend the most money on travel, which adds up to over $12,000 a year.
  • My life is unconventional, but I wouldn't have it any other way. By keeping major costs low, I'm able to spend more on the things that matter to me.
  • Visit Business Insider's homepage for more stories.

Four years ago, I quit my job to travel for as long as my meager savings would last me. I had vague plans of traveling for six months and then returning to the US to look for a new job, until I found myself in the middle of a cheesy romance plot I never asked for.

To give you the condensed version: I fell in love with Costa Rica ... and with the chef at an eco-lodge where I was taking Spanish lessons.

By the time I ran low on money, I'd realized I didn't want to go back to the US or a desk job. Going back would mean breaking up with my partner, who can't even get approved for a tourist visa to the US because of where he was born. It would also mean leaving a country I'd grown deeply attached to and applying for jobs I wasn't excited about. 

So instead, I set out to build my own freelancing business online so that I could work from anywhere. I decided to make a living doing something I'd dreamt of doing every since I was a kid: writing.

Nearing six figures as a freelancer and increasing my savings rate

My first year as a freelance writer was very difficult, and the second year wasn't much better. But by the third year, I had what felt like a reasonably stable income. Now, in my fourth year, I make more than double what I made in my previous career. I'm on track to make $85,000 in 2019. My goal for 2020 is to make six figures.

My income fluctuates a lot because I take time off to travel. My highest-grossing months this year were months in which I didn't travel and worked 40 to 50 hours per week — in February, I made $9,598, and in July, I made $10,478. My lowest grossing months were the three months that I traveled and worked more like 10 hours per week — in March I made $4,315, in April I made $4,522, and in May I made $2,201.

In 2018, I made paying off all of my debt a priority. After I did that, building an emergency savings fund became my focus. For 2019, my goal was to save $3,000 per month to round out my emergency savings fund and start saving for retirement and potential mid-term savings goals like purchasing land or going back to school.

I managed to meet that goal most months. While my savings rate dipped lower during travel months, it skyrocketed during the months I spent at home.

I spend less on rent, transportation, and food

I don't believe that depriving yourself of the occasional latte is an effective way to save money. For one, that $3.50 doesn't add up very quickly, and it's hard to build sustainable habits when you feel deprived.

Instead, I've always believed that the best way to cut expenses and boost your savings rate is by cutting down on your three biggest costs: rent, transportation, and food.

While my monthly income and spending fluctuate pretty drastically — for example, I took most of April off to travel around Japan and went from having a $9,000 month in February to a $2,000 month in May — here's what a typical month looks like:

Rent

My rent is where I cut costs the most. It's common for Americans who move here to rent or buy big American-style homes in gated communities with air conditioning, pools, and other amenities. Instead, I rent a typical Costa Rican home, a small two-bedroom house in a rainforest town. I pay $180 per month, so I save a lot of money, and I get to be part of the community there.

Transportation

For my first three years in Costa Rica, I was car-free. This isn't an easy feat when you live somewhere rural with limited bus service, but I made it work, and my boyfriend had his motorcycle for short trips. Last year, my boyfriend's motorcycle broke down, and I finally decided to get a car.

Cars are more expensive in Costa Rica, and I didn't want to eat into my savings, so I bought a 1995 Geo Tracker for $3,500 in cash. Most people wouldn't be comfortable in such an old car, but I don't mind it. I also still walk and use the bus whenever feasible, so we aren't putting too many miles on the car.

Food

For food, I do a lot of meal prep and try to buy lots of low-cost, high-nutrition foods like beans, bananas, oatmeal, and eggs. I also eat out at least a few times per week when I don't have any meals prepared. A plate of food at a typical restaurant is around $6, and the time I save not cooking or doing the dishes can be spent working and making more money. 

Food is one area where I'm only willing to sacrifice so much — which you can tell from the fact that I spend $300 per month on groceries that are mostly for me. I still buy fancy nut and seed mixes for my oatmeal and coconut milk for my coffee, and I always keep a bottle of quality rum on hand for visitors. However, I've got some wiggle room here and will try to lower my food costs next year, both groceries and dining out, by doing more meal prep.

Most of my money goes toward luxuries and purchases that save me time

While I spend relatively little on necessities, I spend what many people would consider to be too much on things like travel and personal care. 

For example, I spend more than $12,000 per year on travel. This includes travel for both me and my boyfriend. We don't have a strict method for splitting up our finances, but since I have the privilege of being able to make US dollars and thus a higher income, I usually pay all of our bills and major travel expenses like flights and hotels.

We also travel pretty heavily on this. By the end of 2019, I'll have traveled to over a dozen countries on four different continents this year. The two of us manage to travel on a low budget by collecting credit-card rewards to pay for flights and hotels or staying in budget accommodations like hostels and Airbnb or with friends.

I also get my hair done three times per year, and it costs me $300 each time. Every two to three weeks, I get my nails done for $20 to $30. These are expenses most super savers would advise against, but they're worth it to me.

Outsourcing tasks that are time-consuming might seem more expensive than DIY, but because I'm self-employed, I can make more money in the time I've freed up than I spend on outsourcing. For example, I still haven't purchased a washer for the house because I'd rather spend $30 per month to have laundry done at the corner store. I have a housekeeper come twice per month, which costs $40. I also outsource some of my business tasks to a Virtual Assistant and usually spend about $300 per month on that. All of this time saved is time I can spend building my business.

Despite "extravagant" costs like getting my hair or laundry done, my savings rate hovers around 50% and is creeping upward. That's because I've driven my big three costs as close to zero as possible. 

People might think it's odd that I make $85,000 per year and spend $12,000 of it on travel. But they probably also think it's odd that I make $85,000 per year and drive a car that's 24 years old. My priorities are simply different than what's considered the "norm."

Living abroad also makes it easier to align my expenses with my priorities. In the US, even when I'm only visiting, I feel an almost instant pressure upon arriving to constantly spend money on things I don't need and upgrade my lifestyle, and that pressure just isn't as strong in many other places. I check in with myself frequently to make sure that my spending is still aligned with what I truly want and not what society says I should want. This helps me live a rich life on a limited budget.

On my way to financial independence

My goal is to continue saving and investing my money at an extremely high rate until I achieve some level of financial independence. 

This is an important goal for me in part because I worry that there won't be demand for my work one day, and I'll have to find a new way to make money. But it's also important because I want to have the financial freedom to pursue personal projects and focus on doing good in the world.

I want to cut down on travel next year so I can focus on working more consistent hours. I plan to increase my savings rate by cutting costs on travel and eating out. At the same time, I plan to invest more in myself by taking courses that teach me valuable skills and attending conferences to network with people in my industry.

With this plan, my income should increase, and I should also have more time to work on projects that will diversify my income sources. Right now, most of my income comes from freelance writing, so I'm working on creating products, writing a book, and building up a consulting business so that I don't have to rely on one stream of income. This will increase my financial stability.

My life is unconventional, but I wouldn't have it any other way. Some people fear self-employment because there's no guarantee your job will be there next year, and that's true — but there's no guarantee that a traditional job will be there for you next year, either. 

If I lose my main income sources, I've learned two very valuable skills through my first few years of hustling as a freelancer that would help me out: how to live off of very little, and how to market myself. I'm confident that I could pivot if I needed to and still earn a decent wage, and this lifestyle gives me the control over my time that I need to do that.

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The former CEO of a high-speed trading firm is taking aim at Robinhood with a fintech startup that wants to pay you to trade

Sat, 09/28/2019 - 7:18am

  • A former high-frequency trading exec is launching an investment platform called All of Us with hopes of putting a twist on how people pay for trades. 
  • All of Us' chief executive Alan Grujic told Business Insider that his pitch to customers is they can get paid to trade using the San Francisco-based startup. 
  • The CEO says the platform will fully launch in January and has around 100 people on a waitlist to use its product.
  • He sees reaching scale as hitting $2 billion in assets, and is eyeing bigger customers on free-trading apps and smaller customers at discount brokers. 
  • Visit BI Prime for more stories.

The race to the bottom for trading commissions could soon go through the floor. 

A former high-frequency trading executive is betting his newly launched investment platform can take on discount brokers and zero-commission stock trading apps like Robinhood by offering a twist on how fees are structured and disclosed to customers. That includes getting paid to trade. 

Alan Grujic, who was previously the chief executive of Infinium Securities, a high-frequency trading firm in California, founded San Francisco-based startup All of Us last year with the intention of offering an investment platform with a transparent pricing model that shares some of its overall revenue from non-commission sources with customers. He says it will fully launch in January and has around 100 people on a waitlist to use its product.

"If you did a very large trade with us, you get several dollars back. So you'd literally get money into your account," he told Business Insider.

All of Us wants to base its revenue stream on a maximum 50-basis-point fee on client assets held on the platform. Grujic said under his pricing model he needs to reach $2 billion in assets to reach what he considers scale. He does see a path to that milestone within the first year —  although he admits it is an aggressive goal. In an effort to drum up attention, he said the first 10,000 customers will have zero fees whatsoever for the first year.

Grujic said the new platform is targeting users with an average account size of roughly $50,000. He said that potential pool reflects both larger clients from Robinhood and smaller customers from E-Trade and TD Ameritrade

Read more: The inside story of how Robinhood, a $6 billion investing app for millennials, blew a huge launch so badly that Congress got involved

Grujic, along with chief technology officer Iain Clarke, demoed the project at Finovate, a fintech industry conference in New York this week. He supplied the first $2 million in funding for All of Us, then raised an additional $1 million on a convertible note offering led by Apex Clearing, which offers clearing and custody services for many robos and online brokerages. The platform hopes to raise an additional $1 million before the end of 2019. 

The competitive nature of the business was on full display this week. The discount brokerage firm Interactive Brokers said on Thursday it would roll out a commission-free US offering starting in October for US-listed stocks and exchange-traded funds.  Interactive Brokers' announcement promptly sent shares of Charles Schwab, TD Ameritrade, and E-Trade diving.

Charles Schwab offers clients opening an individual brokerage account 500 commission-free online stock and options trades within two years of signing up. TD Ameritrade offers 500 commission-free online stock, options, and exchange-traded fund trades when a new client deposits $3,000 or more. 

And Business Insider reported that JPMorgan's You Invest retail trading platform housed on the Chase website and app has quietly started rolling out options trading to select customers. Options trading fees are $2.95, plus 75 cents per contract. Robinhood launched a zero-commission options trading product in 2017. 

You Invest has offered users 100 free stock trades a year, which can also scale up based on account size and level of service they have with Chase. 

Read more: JPMorgan is taking aim at apps like Robinhood by quietly rolling out options trading to select You Invest customers

'The transaction isn't obvious'

Traditional discount brokers may earn a commission on trades they handle, although that is under pressure industry-wide with apps like Robinhood offering free trades. But brokers can also earn revenue from things like an interest spread on client cash accounts, lending client shares, and from channeling clients' orders through certain traders. 

That income amounts to unquoted costs for the customer, Grujic said. And so instead, All of Us would set a maximum fee — 50 basis points — based on the size of a customer's portfolio that reflects all of those kinds of costs.

And All of Us will refund to customers anything that it takes in over that 50-basis-point benchmark. As an example, the fledgling firm says a member with a $100,000 account would generate a maximum of $500 annually for the company, inclusive of the various revenue streams. 

"Those revenue streams are fine, but they're hard to understand," Grujic said. "The transaction isn't obvious. You don't pay that, so you don't know that is your revenue stream." 

Read more: Meet the 8 key players leading the most innovative tech projects on Wall Street, from massive integrations to building new banks

In particular, selling customers' buy-and-sell orders to sophisticated high-frequency traders, a practice known as payment for order flow, has come into the spotlight.  While the practice is completely legal and not uncommon in the space — E-Trade, Schwab and TD Ameritrade all do it — it is not something that is directly reflected in a commission price tag seen by the customer. 

Robinhood, which charges no trading fees, in particular has drawn criticism for not fully explaining the practice to users. Payment for order flow was more than 40% of Robinhood's total revenue, Bloomberg has reported.  Robinhood founder Vlad Tenev eventually addressed the topic directly via a blog post in October 2018, denying that the practice affects prices and saying Robinhood sells order flow to the firm that is most likely to give you the best execution quality.

Grujic said All of Us plans to reimburse a third of what it generates for selling its order flow directly back to customers, and potentially more later in the year as long as it covers its 50-basis-points fee.

"Everything is becoming free in trading because it actually is something that gets paid for by market-makers," Grujic said. "There is value to that order flow, and it's been monetized. The reason is it's coming down to zero is because there is actually money being made on it."

As firms have pushed to charge less, or nothing at all, they've been forced to lean more heavily on other revenue streams, or create new ones altogether. 

"Forget about trying to explain it in detail. Let's post right on our platform how much we make in our customers in revenue," Grujic said.

Read more: 2 senior executives are now out at Charles Schwab as the discount broker prepares to cut 600 jobs

Discount brokers have been under even more pressure as US interest rates fall. Charles Schwab, which has also been making moves to expand advisory services and is set to close its acquisition of USAA next year, is cutting 600 jobs, and that comes on the heels of high-profile exec exits and restructuring first reported by Business Insider. Earlier this month, we reported some more exec departures in its retail arm as those job cuts take hold, as well as the exit of a prominent markets analyst.

TD Ameritrade and E-Trade have seen executive shakeups at the very top, with CEO departures announced within weeks of each other this summer. 

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