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A tale of two companies: Domo's stock skyrocketed 21%, while Cloudera's stock dropped almost 20%. Here's why Wall Street is paying close attention to both. (DOMO, CLDR)

Thu, 03/14/2019 - 4:53pm

  • After Cloudera and Domo reported their quarterly earnings on Wednesday, both companies saw dramatically different stock movements the next day.
  • Domo, which makes a cloud tool for tracking business information, saw its stock rise $6.69, or about 21%, in trading on Thursday.
  • Shares of Cloudera, which makes software for analyzing huge amounts of information, dropped $2.90, or about 20%.
  • Investors are skeptical about the Cloudera-Hortonworks merger, but they are confident about Domo's new enterprise sales strategy.

Domo and Cloudera, two enterprise companies without much else in common, reported their quarterly financials on Wednesday — and saw dramatic stock moves the day after. 

Cloudera, which makes software for analyzing large amounts of data, dipped $2.90, or almost 20%, on Thursday after reporting revenue well above Wall Street expectations but disappointing future guidance. Analysts were watching this quarter especially closely because it was the first report after Cloudera's merger with rival Hortonworks.

Meanwhile, Domo, which helps businesses keep track of all of their metrics in one place, beat expectations on revenue and gave guidance that was in line with what analysts wanted to see. 

Analysts told Business Insider that Cloudera's tumble is a sign of the skepticism around its merger with Hortonworks, while they believe that Domo's rising fortunes are a sign that its new sales strategy is working.

The Cloudera and Hortonworks merger

Cloudera beat Wall Street estimates on Wednesday, reporting revenues of $144.5 million, versus estimates of $121.1 million.

However, Cloudera estimated revenue for the next quarter of $187 million to $190 million, while analysts forecasted $189.9 million — right at the top of that range. For fiscal year 2020, Wall Street is expecting to see $851.87 million in revenues, which is also toward the top of Cloudera's new estimates of $835 million to $855 million.

Cloudera and Hortonworks sealed the deal and officially merged in January, which means that investors were paying even closer attention to this report than normal, said Dan Ives, managing director of equity research at Wedbush Securities. And when Cloudera reported disappointing guidance, it "fanned the flames of those worries."

Read more: Two public tech companies are about to merge, creating a $5.2 billion data processing giant — and their stock prices are soaring as high as 15%

"When you make an acquisition like this, these two companies combining, Hortonworks and Cloudera, in the first 3-6 months of an acquisition, everything needs to be flawless in the eyes of the Street in order to get confidence," Ives told Business Insider. "They definitely stumbled over their shoelaces in terms of guidance. That's really been the focus of investors."

Ives said that it's possible that Cloudera was just being conservative in its estimates, and Wall Street may be worried over nothing. He's bullish on the merger of Cloudera and Hortonworks because it makes sense on paper and could be a major step forward — especially in an era where similar tools from the likes of Amazon Web Services and Microsoft Azure are picking up steam. 

However, he said Cloudera needs to execute much better next quarter to prove the naysayers wrong and show that the companies are successfully integrated. 

"The knee-jerk reaction is a bit of an overreaction," Ives said. "In order to see the stock move significantly higher, there's a lot more wood to chop in terms of sales acquisition and proving to the Street that this is a 1+1=3 acquisition and not 1+1=1.5."

A smarter sales strategy for Domo

As for Domo, it reported quarterly revenues of $39.4 million on Wednesday, beating Wall Street's predictions of $37.75 million. It also forecast revenues of $40 million to $41 million for the next quarter, compared with Wall Street's estimates of $40.4 million, putting its guidance right in line with expectations.  

For the full fiscal year 2020, Domo predicts revenues of $173 million to $174 million, compared with Wall Street estimates of $173.86 million, also in line with expectations. 

Domo's beat proves that its new sales plan is working, J. Derrick Wood, managing director at Cowen, said. Domo is a client of Cowen, according to the firm's disclosures. 

Before, Domo was selling to all sorts of businesses, from small- and medium-size ones to major enterprises. It spent its resources on research and development to build its platform, but the company wasn't selling and showcasing its products correctly, he said. 

This quarter, Domo finally realized that its platform is best-suited for larger enterprise customers, Wood said.  As a result, Domo coalesced over building a strategy targeting these types of companies, learned to effectively sell to enterprises, and hired new sales leadership.

"One thing they did was embrace the CIO in the sales cycle," Wood told Business Insider. "They can sell to marketing, they can sell to finance, but embracing the CIO at the same time was getting them to help customers realize the full potential of the platform and the endless use case possibilities around the platform."

When Domo first went public last June, some experts warned investors to stay away, citing its high spend on sales and marketing, among other factors. But now, investor confidence in Domo appears to be growing.

Read more: Domo went public and investors are biting but a watchdog warns 'stay away from this IPO'

Wood said Domo will continue to be promising. He said the analytics market looks encouraging, and if Domo keeps up with its strategy, it "absolutely can be successful" and accelerate its revenue growth. He said Domo is already planning to grow its sales team.

"We think all these vendors can be very successful and Domo has a very unique platform with a lot of technology investment, so the product is there," Wood said. "It's just a matter of figuring out how to sell it and how to take it to market. That's the key to unlocking success and growth and market share. That's where we're seeing early signs of improvement."

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UBS Global Wealth Management president says the future of US citizens is at risk if we don't repair decaying bridges and outdated transit systems

Thu, 03/14/2019 - 4:52pm

  • Tom Naratil is co-president of UBS Global Wealth Management and president of UBS Americas.
  • In this op-ed, he says if the US doesn't invest in next-generation infrastructure, the well-being of our citizens is at risk.
  • These investments promote industries of the future and are necessary to ensuring our long-term economic viability.

For many, the term “infrastructure” elicits images of decaying bridges, outdated transit systems, and vulnerable power grids — for good reason. Most of our decades-old physical infrastructure is in need of massive, overdue attention. But as the recent Mobile World Congress demonstrated, the introduction of exciting next-generation technologies means that we must also invest in systems that will propel a modern economy, while simultaneously repairing the bricks-and-mortar infrastructure of the past.

As we saw in the headlines out of Barcelona last week, 5G, AI-enabled connected homes, and smart energy grids are now closer to reality. But these tools will be virtually useless without modernized telecommunications and energy infrastructure. And if we don't continue to innovate and invest both public and private capital, future economic growth and the well-being of US citizens are at risk.

There’s reason to be hopeful, though: First, the private sector overwhelmingly supports public infrastructure investment; and second, it's willing to put its money to work alongside the government.

A recent UBS poll found 90 percent of high net worth investors and 83 percent of small business owners agree government should spend more time and money on improving infrastructure. Roughly one-third of business owners told us they would invest more in their business and 26 percent would expand their business into new markets if Congress passed an infrastructure package, creating jobs and stimulating the economy.

These investments promote industries of the future while improving the environment, which is necessary to ensuring our long-term economic viability. Small business owners and high net worth investors agree: 81 percent of both groups believe infrastructure investments are the key to long-term economic growth.

Take AI as an example: the World Economic Forum expects machines and algorithms in the workplace to generate 58 million net new jobs by 2022. Yet our existing infrastructure is unprepared to support this. The FCC found that US broadband speeds are ranked tenth among developed nations and individuals pay an average $58 per month for broadband, “among the worst in the developed world.” Again, small business owners and high net worth investors are advocates: 45 percent of the former and 44 percent of the latter believe it’s very important that widespread access to high-speed internet be a focus of infrastructure improvements. Without this access, poorer residents of rural areas and tribal lands will fall further behind in educational opportunities and income.

Or look at the potential for clean energy. The International Renewable Energy Agency estimates that the decarbonization of the global energy system can create up to 28 million jobs by 2050. These jobs will require state-of-the-art energy infrastructure to flourish. That’s why 65% of high net worth investors and 61% of business owners want utilities to be a focus of infrastructure improvements.

Even more encouraging, private investors want to actively participate in infrastructure investment. More than half of investors we polled want the government to encourage more private sector involvement in infrastructure.

Private capital and public-private partnerships must be incentivized in several new ways: cutting red tape by mandating an accelerated review process for projects of “national significance”; expanding tax-advantaged investments like private activity bonds; eliminating restrictions on the use of proceeds from the privatization of public assets; and creating a National Infrastructure Fund for major projects, among many other steps.

Importantly, we must also ensure the benefits of these investments are felt as widely as possible. Initiatives like Opportunity Zones (OZs), economically-distressed communities where new investments may be eligible for preferential tax treatment, are a step in the right direction.

OZs could establish a powerful incentive for significant long-term private investment in these communities, which are home to 35 million Americans. Organizations like the Economic Innovation Group estimate the potential capital eligible for reinvestment in OZs could total as much as $6.1 trillion. However, before significant capital can flow into OZs, the Treasury Department must first clarify a number of key issues, including the role that multi-asset funds can play and minimum impact reporting requirements.

There’s little debate that spending is desperately needed to modernize our existing infrastructure and to lay the foundation for a robust economy of the future in which all Americans can participate. Our recent survey revealed widespread belief that US infrastructure is falling behind other countries and that economic growth will slow if Congress doesn't pass a new infrastructure bill. Popular support persists and the investment dollars are waiting to participate. Now is the time for the private sector, Administration, Congress and state leaders to come together to reinvest in our country’s future. Our continued economic expansion and competitiveness depend on it.

Tom Naratil is co-president of UBS Global Wealth Management and president of UBS Americas.


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The CEO of an international luxury restaurant group opening a spot in Hudson Yards says diners want 3 main things — and it shows just how much fine dining has changed

Thu, 03/14/2019 - 4:40pm

  • Diners are moving away from the traditional hallmarks of fine dining, according to luxury restaurant group D&D London's CEO.
  • D&D's portfolio includes a Michelin-starred restaurant and a new restaurant in New York City's $25 billion Hudson Yard neighborhood.
  • Diners are now seeking three things, he said: informality, fun, and authenticity.
  • This is creating a new kind of luxury dining experience in which fine dining is less about the fancy trappings and more about the overall quality.

Fine dining just isn't what it used to be — but that's not a bad thing.

Des Gunewardena, CEO and chairman of UK luxury restaurant group D&D London, told Business Insider that people are moving away from the traditional hallmarks of the term "fine dining."

Gunewardena is behind more than 40 restaurants worldwide, which have been frequented by celebrities and royalty throughout the years, from Elizabeth Taylor and Princess Diana to Naomi Campbell and Sir Elton John.

That portfolio includes Michelin-starred restaurant Angler in London and most recently, queensyard, a restaurant set to open on March 14 in New York City's new $25 billion Hudson Yards neighborhood — the most expensive real-estate development in history.

Read more: I toured a new 92-story luxury tower in NYC's Hudson Yards, where condos start at $5 million — and it was clearly designed to be so much more than just a residential building

So it's safe to say Gunewardena, who's roughly 13 years in with D&D Group, has been around to witness the evolution of fine dining. According to him, there are three things today's diners are seeking when it comes to a luxury dining experience.

"Everyone wants informality, and they want to have fun when eating out," said Gunewardena, adding that many of his customers ordering "seriously good wine" are tech guys wearing jeans and t-shirts. "They don't want to feel as if these are intimidating places — people get more enjoyment out of informality where staff is relaxed."

Diners are also moving away from artifice, he added: "People are more demanding about understanding where everything comes from — you have to be authentic."

People don't want to do be preached to, he said. For example, diners at a farm-to-table restaurant don't want to know the whole background story that begins with the farmer getting up in the morning — they just want to be confident the meat is good quality meat and has been aged properly.

Fine dining is still about quality

But there's one thing that hasn't changed about fine dining: quality food. And it's best presented and cooked with simplicity.

"People aren't interested in how clever you are on the plate; they're not going to the restaurant to be impressed by how clever the chef is," Gunewardena said. "They're going, in the main, to taste great food that has been properly sourced and is often a simple dish that has a slightly different treatment. What is celebrated is a lovely piece of fish or meat rather than how clever you are combining some crazy flavors no one's ever heard of."

There's certainly a crowd for this kind of molecular cooking, he added, but that's not where the world is going.

Read more: After a $500 meal at the world's most luxurious hotel, I stumbled across a $1 fish restaurant on the Moroccan coast — and I'd pick the cheaper one every time

Consider Business Insider correspondent Harrison Jacobs' experience, who dined at the flagship restaurant of the Burj Al Arab in Dubai, one of the world's most decorated luxury hotels where checks can easily top $400 for two people. Not long after, he ate at a local fish restaurant in Morocco. His preference for the latter made him realize that good food doesn't have to be fancy, complicated, or even expensive.

What people usually pay for in a luxury restaurant, Jacobs wrote, is the atmosphere — the ambiance, setting, and excellent service.

But ultimately, there seems to be a general, growing shift in focus from the fancy part of fine dining to the quality aspect.

"People will go into restaurants and spend $500 on a bottle of wine in their jeans and be having a steak — there's a real crossover between what's considered fine dining," Gunewardena said. "People want quality dining — there's a difference between quality and casual."

SEE ALSO: I toured the first residential building to open in Hudson Yards, NYC's new $25 billion neighborhood — and it was clear it's selling much more than just real estate

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Ulta jumps after earnings, sales, and guidance top expectations (ULTA)

Thu, 03/14/2019 - 4:37pm

Ulta Beauty shares jumped as much as 6% in after-hours trading on Thursday after the company's fourth-quarter sales and profits topped analysts' expectations. 

Here's what Ulta reported for the fourth-quarter, compared with what Wall Street analysts surveyed by Bloomberg were expecting.

  • Revenue: $2.12 billion versus $2.11 billion expected.
  • Adjusted earnings per share: $3.61 versus $3.56 expected.
  • Comparable sales: +9.4% versus +7.9% expected.
  • Full-year EPS guidance: $12.65 to $12.85, versus $12.74 expected. 

The company said its spike in comparable sales was driven by a 7.1% increase in transactions and 2.3% rise in its average ticket price. Ulta also said its e-commerce comparable sales rose 25.1% year-over-year during the quarter.

Last quarter, Ulta shares fell 7% after the beauty retailer gave earnings and sales guidance that fell short of estimates. Earlier in the year, the chain was widely seen to have benefitted from its partnership with reality star Kylie Jenner.

Still, Ulta's share price has been on a tear since hitting a low of $224.70 at the end of last year. Since December 24, the stock has surged 40%, settling Thursday at $312.63. 

At its close of trading on Thursday, Ulta was trading just below its November record high of $322.49 per share.

Read more markets and retail coverage from Markets Insider and Business Insider:

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Apple's iPhone sales are starting to stabilize in China, Morgan Stanley says (AAPL)

Thu, 03/14/2019 - 4:14pm

  • China's demand for iPhones appears to be stabilizing according to data compiled by Morgan Stanley.
  • The iPhone's increased market share in China is due to cutting prices amid a weakening smartphone market in the country.
  • Apple earlier warned investors on fourth-quarter revenue, citing a steep drop in demand in China iPhone sales.
  • Watch Apple trade live.

iPhone demand in China, a key weakness driving down Apple's stock recently, appears to be stabilizing according to new research from Morgan Stanley analyst Katy Huberty. Apple shares gain more than 1% on Thursday.

"After losing share in 4Q18, iPhone installed base shows market share recovering after price cuts in early 2019," Huberty wrote. "Combined with stabilizing iPhone supply chain data points, we now see an upward bias to our iPhone estimates in the March quarter." 

Huberty lists four reasons for the stabilization, based on preliminary data compiled by Morgan Stanley:

  1. Apple gained market share over the past two months despite Chinese smartphone shipments hitting a six-year low in February as price cuts to the its latest model, the iPhone XR, provided a lift. The smartphone giant had lost market share in the fourth quarter.
  2. February was the first month since August that iPhone builds were not revised lower, signaling that inventories for the smartphones were no longer building.
  3. Build estimates are running ahead of forecasts for the first quarter, implying that sales forecasts may be conservative.
  4. Replacement cycles appear to have finally converged with personal computers, implying a stabilization of demand.

Huberty maintained her overweight rating and $197 price target — a 7% increase from Thursday's close.

Huberty's conclusion is aligned with that of UBS analyst Tim Arcuri, who last month posited the worst of the iPhone's demand issues are over. Arcuri also cited inventory and supply-chain data indicating that Chinese demand had stabilized.

Apple's shares slid 9% in January after the iPhone maker issued a rare revenue warning for the fourth quarter. The firm cited weakness in China iPhone sales as a key driver of the expected sales shortfall. The revenue warning was the first in 12 years for the company and led to a raft of downgrades by Wall Street analysts.

Apple was up 16% this year.

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Tesla is set to unveil the Model Y — and one analyst says it could double the company's addressable market (TSLA)

Thu, 03/14/2019 - 3:55pm

  • Wall Street analysts are rife with predictions for Tesla's Model Y, set to be unveiled tonight. 
  • Gene Munster of Loup Ventures estimates the new car could double Tesla's total addressable market. 
  • The company shared a teaser of the car on Twitter Thursday. 

Tesla's Model Y is set to be unveiled on Thursday night.

The company released a teaser video in the hours leading up to the event, which kicks off at 8 PM Pacific at Tesla's design studio in Hawthorne.

Meanwhile, Wall Street predictions for the car and the implications for Tesla's business have been pouring in as the car's launch approaches.

Longtime Tesla bull Gene Munster couldn't be more excited. In a note to clients Thursday, Munster estimated the Model Y could double Tesla's total addressable market.

"The Model Y is important because entering the SUV/cross over market effectively doubles Tesla's addressable market, but we caution it will likely take two years before the $39k model will be available," he said.

Muenster notes that we likely won't see pre-order data from the Model Y as we did with the Model 3 in 2016, because those numbers will likely pale in comparison to the sedan. What's more, anyone who puts down a deposit likely won't even see the car until at least 2021.

Here are some more of Munster's predictions for Thursday's reveal:

  • $39,000 RWD 
  • 62 kWh battery pack  
  • 230 EPA mile range 
  • 0-60 in 5.9 seconds 
  • 0.25 drag coefficient 
  • 187 inches long
  • Model Y shares 75% of the same parts as Model 3.
Now read:

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A top Goldman Sachs sales trader is leaving to take a big role at JPMorgan

Thu, 03/14/2019 - 3:48pm

  • JPMorgan Chase has poached a top stock salesman from rival Goldman Sachs.
  • Jack Johnston is joining the firm as cohead of US equity sales trading, according to people familiar with the matter.

A top Goldman Sachs stock salesman has left the firm, and he's headed to rival JPMorgan Chase, according to people familiar with the matter.

Jack Johnston, a managing director in equity sales at Goldman since 2013, is leaving for JPMorgan, where he will be a managing director and cohead the US equity sales trading business, the people said.

Johnston will cohead the business alongside Benno Green, and they will report to Adam Englander, who coheads Americas execution services with Matt Mallgrave.

A JPMorgan spokesperson declined to comment. A Goldman spokesperson also declined to comment.

It's the second senior defection in Goldman's equities division in the past week. Danielle Johnson, a managing director in the bank's client-relationship-management group, was poached by Credit Suisse to co-run its Americas equities business with Paul Galietto, Bloomberg reported last Friday.

Goldman Sachs reported $7.6 billion in equities revenues in 2018, a 15% increase from 2017. JPMorgan reported $6.9 billion in 2018 equities revenues, a 21% uptick from 2017.

A roughly two-decade Wall Street veteran, Johnston spent about six years at Morgan Stanley before joining Goldman in 2013.

At Morgan Stanley, Johnston was reportedly a top salesman to SAC Capital, billionaire Steve Cohen's old hedge fund before it was shut by regulators and converted to a family office. It isn't clear whether he does business for Cohen's new fund, roughly $13 billion Point72 Asset Management.

Johnston did not immediately respond to requests for comment.

This post has been updated from its original version.

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Asset manager Franklin Templeton's board member John B. Wilson was removed after he was caught up in the college admissions bribery scheme

Thu, 03/14/2019 - 3:44pm

  • Investment management firm Franklin Templeton's board member John B. Wilson was removed after he was among dozens of people indicted by the FBI on Tuesday in an alleged college admissions bribery scheme.
  • Wilson served as the lead independent trustee of 112 portfolios in the fund complex of Franklin Templeton Funds. He was also the designated financial expert of Franklin Funds' audit committee.

Franklin Templeton's board member John B. Wilson was removed, a company spokesperson confirmed, after he was among dozens of executives and Hollywood stars indicted by the FBI in an alleged college admissions bribery scheme. 

Wilson served as the lead independent trustee of 112 portfolios in the fund complex of Franklin Templeton Funds. He was also the designated financial expert of Franklin Funds' audit committee. Wilson had been named a trustee of Franklin Funds since 2006 and lead independent trustee since 2008. 

Wilson is also the president and CEO of Hyannis Port Capital, a consulting and private-equity firm investing in micro-cap private companies. The company didn't reply to a request for comment from Business Insider. 

In the recently unveiled college bribery scheme, Wilson was accused of conspiring to "bribe Jovan Vavic, the USC water polo coach, to designate his son as a purported recruit to the USC men's water polo team, thereby facilitating his admission to USC," according to court documents. He also "sought to use bribes to obtain the admission of his two daughters to Stanford University and Harvard University as recruited athletes," according to the documents.

Wilson was charged with "conspiracy to commit mail fraud and honest services mail fraud" in the Southern District Court of Texas.

Franklin Templeton has already found Wilson's replacement.  

Current independent trustee Edith E. Holiday was named lead independent trustee, and current independent trustee, Terrence J. Checki was named Chair of the Audit Committees, the company spokesperson said.

High-flying financiers and Hollywood celebrities are among those accused of paying bribes to get their children into elite universities including Georgetown, Stanford, and Yale. Some parents are accused of having their children recruited as Division 1 athletes, regardless of athletic abilities, while others are accused of having stand-ins take SAT and ACT exams for their children.

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Trump reportedly considered whether grounding Boeing 737 Max planes would spark panic and hurt the stock market

Thu, 03/14/2019 - 2:23am

  • Prior to making his decision, President Donald Trump considered whether grounding the Boeing 737 Max in the US would negatively impact the stock market and cause panic, according to a Washington Post report.
  • Trump reportedly leaned toward declaring an order to ground the aircraft on Tuesday, but was met with resistance from the Federal Aviation Administration.
  • The president was "engaged" with advisers, one official told The Post, and compared the 737 Max with the Boeing 757, his own personal jet dubbed "Trump Force One."

President Donald Trump vacillated about whether he should ground all Boeing 737 Max aircraft in the US, and considered whether it would negatively impact the stock market and cause panic, two people familiar with his conversation said in a Washington Post report Wednesday.

Trump reportedly leaned towards declaring the order on Tuesday, but was met with resistance from the Federal Aviation Administration, The Post reported.

The FAA's recommendation to ground the aircraft "out of an abundance of caution" on Wednesday pivoted from its earlier statement on Tuesday evening.

"Thus far, our review shows no systemic performance issues and provides no basis to order grounding the aircraft," Acting FAA administrator Daniel K. Elwell said in the Tuesday statement.

Trump reportedly received satellite data on Tuesday night that suggested the same 737 Max automated system that was likely involved in another deadly crash may have played a role.

A faulty sensor reading from an automated system is believed to have been the root cause of a Lion Air 737 Max crash near Indonesia in 2018, where all 189 people aboard were killed.

The president was "engaged" with advisers, one official told The Post, and compared the 737 Max with the Boeing 757, his own personal jet dubbed "Trump Force One." Trump had reservations with the 737 Max, which he said "sucked," and debated why Boeing continued to produce the aircraft, according to The Post.

Scrutiny over the 737 Max's safety comes after the Ethiopian Airlines Flight ET302 crash that killed all 157 passengers aboard the four-month-old aircraft. Following the crash, other countries grounded the aircraft, including China, which has the most number of 737s.

The US was the last country where the aircraft was substantially flown to ground the plane.

SEE ALSO: Trump announces all Boeing 737 Max jets are immediately grounded following its 2nd crash in 5 months

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A fifth of Americans say they have zero savings

Thu, 03/14/2019 - 12:01am

  • About one-fifth of Americans don't have any savings, according to a new survey.
  • The personal savings rate in the US has fallen since the 1980s, prior to which it routinely held in the double digits.
  • Savings have improved in recent years, but some Americans have said they would still have trouble paying for an unexpected $400 expense like a car repair.

About a fifth of Americans have no money tucked away for unexpected costs. 

About 21% of working Americans said they aren’t saving any money at all, Bankrate found in a survey. Among those who are saving, a majority are putting away less than 10% of their income.

Over the past several decades, household savings in the US have been trending downward. By the Bureau of Labor Statistics' measure, Americans were saving 7.6% of disposable income in December. Before the 1980s, that rate had mostly been in the double digits. 

Widening inequality has been one potential reason the personal savings rate has remained low by historical standards and compared with other countries, said Brian Rose, the senior Americas economist at UBS Wealth Management.

"Among lower income households, they're mostly living paycheck to paycheck and even struggling to do that," he said. "So, they have no leeway in their finances."

While households have become increasingly prepared for unexpected expenses in recent years, according to a recent Federal Reserve survey, four in 10 Americans say they would have trouble covering a $400 expense like a car repair or fixing a broken appliance.

That doesn't mean Americans aren't trying to save, according to Jonathan Morduch, an economist at New York University and a coauthor of "The Financial Diaries," a book detailing a study of the spending habits of 235 households over a year.

"The evidence we see is that households are often saving and then spending that down," he said. "So, when a fifth of Americans say they don't have any savings, it means they don't have any long-term savings."

That could be in part because Americans are struggling to pay off loans, with about 13% in the Bankrate survey citing debt as a reason they can't save. From car loans to tuition, Americans have increasingly struggled to make payments on the country's $4 trillion of consumer debt.

"How much does growing debt have to do with it?" Morduch said. "The answer is a lot."

In coming months, a lack of savings could become more serious for Americans. Economists widely expect growth to slow over the next two years, while some even expect the US to enter a recession by 2020. 

"It’s clear that not everyone has benefited from the economic expansion," said Ryan Sweet, an economist at Moody's Analytics, said of the Bankrate savings survey. "Also, it shows we are not ready for the next recession."

SEE ALSO: Americans are struggling with their credit card debts, and 2 million accounts fell seriously behind in 2018

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Spotify just painted a big target on Apple's back, and the iPhone maker should worry if antitrust regulators start aiming at it (AAPL, SPOT)

Wed, 03/13/2019 - 10:53pm

  • The complaint Spotify filed against Apple with European competition regulators on Wednesday represents a real danger to the iPhone maker.
  • Spotify's complaint looks legitimate and is similar to those successfully made against Microsoft and Google.
  • European regulators have been much tougher in recent years in cracking down on tech companies anti-competitive moves than American antitrust regulators.
  • Should they find Apple guilty of abusing its market power, the company could face big fines and restrictions that could thwart its burgeoning services business.
  • The complaint comes amid growing complaints in the US about the market power of big-tech companies and could spur a parallel investigation here.
  • Apple could see its reputation tarnished by such investigations, which could be the biggest danger of all.

Spotify's decision to file a complaint against Apple with the European Commission alleging unfair competition should worry the folks in Cupertino.

At first glance, the streaming music company would seem to have a legitimate complaint. In fact, what Apple is alleged to be doing isn't all that different from what got Microsoft in trouble with antitrust authorities 20 years ago and what led to a $5 billion fine against Google just last year.

If history is any guide, Spotify's complaint could lead to a similarly large fine against the iPhone maker. It might also lead to restrictions that could hamper Apple's services business, which the electronics giant has been touting as its future. And the complaint could spur a parallel antitrust investigation here in the US.

But perhaps more importantly, Spotify's allegations — any investigation that truly digs into them — could sully Apple's reputation with consumers. That could be extraordinarily costly for a company that has long benefited from public adulation and the hundreds of millions of dollars worth of free publicity that's come hand-in-hand with it.

Read this: Spotify is going to war with Apple, filing an antitrust complaint over fears that it is crushing competitors

Those targeting the big tech firms haven't been aiming at Apple

Until now, Apple has been fairly lucky. Although there have been growing calls to address the market dominance of the big-tech companies, advocates have generally focused on Facebook, Google, and Amazon.

Apple has often been left out of the list of potential targets.

It's not hard to understand why. Apple has a huge number of fans, and 20 years after it nearly went bankrupt, it's still viewed by many as an underdog. And while the iPhone maker is currently the second most valuable public company in the world, it doesn't appear to dominate markets in the same way that the other big-tech firms do.

Facebook is the dominant social network. Google owns the search market and the vast majority of smartphones worldwide run its Android operating system. Between the two of them, the companies are expected to account for more than half of the global digital ad market this year.

Meanwhile, about half of all US e-commerce purchases are made through Amazon. And Microsoft still dominates the PC operating system market.

By contrast, Apple wouldn't seem to control any notable industries. Its Mac computers have long had only a small portion of the overall PC market. The iPhone may be one of most popular lines of smartphones in the world, but Samsung sells more phones overall and Huawei has nearly overtaken Apple in market share. Apple Music may have raised Spotify's ire, but it's still a distant second to Spotify in terms of subscribers.

But such high-level views understate Apple's actual market power.

Apple has monopoly control over the iPhone app marketplace

Depending on which research firm you believe, around 35% to 40% of the smartphones sold in recent months in the US were iPhones. And, again, depending on which firm you believe, around 45% to 55% of the smartphones currently in use in the US were made by Apple. In either case, the number of Americans with iPhones is a huge number.

Regardless of its overall market share in smartphones, Apple's operating system runs on 100% of the iPhones in use in the US and worldwide. You basically can't run an operating system other than Apple's iOS on an iPhone and you can't run iOS on any devices but iPhones.

What's more, Apple controls the distribution of apps to iPhone users. While there are a few exceptions, iPhone users generally have to get their apps from Apple's App Store.

Apple's control over the operating system and app store on iPhones is akin to a railroad that serves as the only rail link for a section of the country, said Matt Stoller, a fellow with the Open Markets Institute, a research and advocacy group that focuses on the dangers of corporate concentration. That railroad may not dominate the entire nationwide market, but for the area in which it operates, it's a monopoly.

Spotify and other app makers "can't get to their customers who use iPhones except through Apple's App Store," Stoller said, adding that the App Store "is a monopoly, at least to an important set of Spotify customers."

Apple seems to be abusing its power

Apple, arguably, has been abusing that monopoly. Unlike Spotify's music app, or Google's Chrome browser, Apple's rival apps — Apple Music and Safari — are built into iOS and come pre-installed on the iPhone. On the iPhone, users can't chose alternate apps to be their defaults; generally if they click on a web link, it will open in Safari, even if they have Chrome installed. According to Spotify, Apple's Siri still won't play songs in its music app, but has no problems playing songs in Apple Music.

And Spotify says Apple has been doing much worse than that. Apple requires that apps listed in its App Store that offer subscriptions use its payment service, for which Apple charges a 30% commission.

The company forbids developers from pointing users to their web sites to sign up for subscriptions there instead.

So, developers face a choice — they can pay Apple's tax to make it easy for users to sign up for subscriptions, or they can save money and offer a worse experience.

The fee Apple charges can make competing services uncompetitive. To recoup its costs for paying Apple's commission, Spotify used to charge its iPhone users $12.99 a month — $3 more than it charged those who signed up through its website. By contrast, Apple Music didn't have to pay those charges and iPhone users were able to sign up for subscriptions inside its app for just $9.99, Spotify says.

What's more, Spotify says Apple has barred it from advertising or offering promotional rates for its service inside its app. It's also repeatedly delayed approving Spotify's app updates, the streaming music service said.

And for years, according to Spotify, Apple blocked it from offering an Apple Watch app and still bars it from offering an app for Apple's HomePod smart speaker.

Apple's actions appear similar to Microsoft's and Google's

Those kinds of alleged actions are reminiscent of the anti-competitive — and illegal — moves that Microsoft and Google were found to have perpetrated. In both cases, the companies were found to have used their dominance over an operating system to give an unfair advantage to their own apps or services.

In Microsoft's case, it famously used Windows to promote Internet Explorer and thwart Netscape's rival Navigator browser. In Google, it used its control of Android and the Google Play store to force smartphone makers to make its search engine and its Chrome browser default apps on their devices.

In a similar way, Apple has "dominant power over what is a vital artery of commerce," Stoller said.

Spotify's complaint is only the beginning of what could end up being a years-long investigation by the EC's competition regulators. But even the possibility of such an investigation should be worrisome to Apple CEO Tim Cook and his crew.

While US antitrust regulators have been lax about their duties in recent years, the EC has been much more aggressive.

The competition authority has twice fined Google for illegally abusing its market power, most recently this past summer levying a $5 billion fine as part of the investigation into Google forcing smartphone makers to install its Android apps. It also fined Microsoft more than a billion dollars in total for abusing its Windows monopoly.

With more than $200 billion in the bank, Apple could easily afford such a fine. What might be more painful for it, though, are restrictions the EC could place on its business. As part of its decision against Google, the EC ordered it to stop forcing smartphone makers to install its apps as a condition of using Android and gaining access to the Google Play Store. Regulators could similarly order Apple to stop giving preferential treatment to its own apps.

Warren's call could prove costly to Apple

And if Sen. Elizabeth Warren of Massachusetts has her way and gets US regulators involved, they could do much more than that. Warren has called for an end to the practice of companies both owning a platform and participating in that platform. She's specifically named Apple as a company that's in violation of that principle.

In Apple's case, such a rule would mean is that it wouldn't be allowed to both operate an app store and offer apps that compete against apps listed within it. So, the company could choose to operate the App Store or offer Apple Music, but not both.

While Warren's no shoo-in to become president, she's only part of a growing chorus on this side of the Atlantic calling on regulators here to break up the tech giants. Even if she doesn't reach the White House, her ideas on what to do about them could well influence whomever is elected next year.

The kinds of prohibitions Warren is calling for could stymie Apple's burgeoning services business. Much of the revenue garnered by that segment comes from Apple's commissions off App Store sales and from subscription revenue from Apple Music. Later this month, it's expected to launch a subscription streaming video service that will compete with Netflix and bring in additional services dollars.

As Apple's iPhone sales have started to decline, it's been banking on its services business to drive future growth. But regulators could undermine that effort.

Apple could suffer more than most from bad PR

But the bigger danger to Apple from the Spotify complaint could be the public-relations hit it could cause. In the mid-1990s, before the antitrust trial, Microsoft was one of the most respected companies in the US and Bill Gates was one of the most widely admired business leaders.

But that case, which brought to light Microsoft's cutthroat tactics and Gates' seemingly disdainful attitude toward government oversight, damaged the reputations of both.

That negative PR arguably encouraged both consumers and corporate customers to seek alternatives to Microsoft and opened up space in the market for products from Google, Mozilla, and, yes, Apple.

Today, Apple ranks among the most admired companies in the world.

And the largely positive feelings and excitement it engenders among its many fans has brought the company millions, perhaps billions, of dollars worth of free and largely positive publicity over the years.

Thanks to that, the iPhone maker's marketing budget has been a fraction of the size of other consumer companies.

An antitrust complaint could transform the public perception of Apple from being the cool, consumer-friendly alternative company to just another ruthless bottom-line focused corporation.

You can bet that Apple really doesn't want to face that music.

SEE ALSO: Facebook, Google, Apple, and Amazon have too much power — so it's time for regulators to take on tech's titans

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Canada, Europe and more than 50 countries have grounded the Boeing 737 Max 8 after its 2 deadly crashes — here's who's taken action so far (BA)

Wed, 03/13/2019 - 10:20pm

  • Ethiopian Airlines Flight 302 crashed Sunday, killing all 157 passengers on board.
  • The crash had eerie similarities to the Lion Air crash in October, which also involved a Boeing 737 Max 8.
  • Countries and airlines around the world are grounding their Boeing 737 Max 8 fleets, including New Zealand, Germany, France, and the United Kingdom.

The crash of Ethiopian Airlines Flight 302 on Sunday, which killed all 157 people on board, was the second crash of a Boeing 737 Max 8 in the past five months.

That has prompted a growing number of countries and airlines to ground that model of aircraft while Boeing investigates whether there's a link between Ethiopia's disaster and the crash of Lion Air Flight 610, which plunged into the Java Sea 12 minutes after takeoff in October.

The US's top air-safety regulator said in a Continued Airworthiness Notification to the International Community, or CANIC, on Monday evening that the plane was still safe for flight and that there was no data to "draw any conclusions" linking the two disasters.

Still, the Federal Aviation Administration said it would recommend design changes to the airplane as well as software updated to the plane. Fifty-nine airlines around the world operate the plane, according to the FAA.

Canada, Britain, Australia, China, France, and more have grounded the plane. Here's who's taken action so far (this list will be updated):

SEE ALSO: The black box from the crashed Ethiopian Airlines flight has been found

Ethiopian Airlines, the carrier whose plane crashed on March 11.

Ethiopian Airlines on Monday said it would ground all of its Boeing 737 Max 8 aircraft "until further notice." 

Tweet Embed:
Accident Bulletin no. 5 Issued on March 11, 2019 at 07:08 AM Local Time



German authorities barred the 737 Max 8 from the country's airspace on Tuesday, ntv Nachrichten reported. On Monday, a representative for Germany's transport ministry told Reuters that no German airliners used the 737 Max 8.


Canada's Transportation Minister Marc Garneau said Tuesday that all Boeing 737 Max 8 or 9 will be banned from Canada for an "indefinite period." 

See the rest of the story at Business Insider

A new survey shows that zero top US economists agreed with the basic principles of an economic theory supported by Alexandria Ocasio-Cortez

Wed, 03/13/2019 - 7:38pm

  • Modern monetary theory (MMT) is becoming a larger part of the economic conversation.
  • The theory posits that government deficits are less concerning if a country controls its own currency and issues debt in that currency.
  • MMT says that the amount a government can spend is limited by real assets and the debt's effect on the broader economy.
  • MMT has received a huge amount of pushback.
  • In a new survey, not a single mainstream economist agreed with the basic aspects of MMT.

Modern monetary theory (MMT) is having a moment.

The once fringe idea has been vaulted into the national conversation as progressive economists and some politicians seize hold of the economic theory. Even Federal Reserve Chairman Jerome Powell has weighed in on MMT.

However, according to a new survey, MMT may be getting attention, but it is not getting much support among some of the country's top economists.

Put (very) simply, MMT posits that a country that controls its own currency can continue to pay down its debt as long as it is denominated in that currency. So since the US prints dollars and issues debt in dollars, it can pay down its debts and does not need to rely on taxes to fund debt issuance.

Instead, the theory says, a country in the aforementioned situation is limited by the availability of real assets. So while we can't just ignore the national debt, unlike a household budget, the debt number — such as the US's record $22 trillion debt load — doesn't matter until inflation and economic effects show up.

Explained to Marketplace by the economist Stephanie Kelton, an MMT proponent, Congress would use fiscal policy to control how much money goes into the economy. To borrow Marketplace's metaphor, Congress would be a sink faucet, money would be the water, and the stoppered sink bowl would be the economy. To deal with inflation (an overflow out of the bowl) you can lessen the flow of water into the bowl. Taxes would also act as the stopper letting money out of the economy sink bowl.

The idea has gained a following among progressive economists and some politicians. Rep. Alexandria Ocasio-Cortez told Business Insider in January that MMT should be "a larger part of our conversation."

Read more: Alexandria Ocasio-Cortez says the theory that deficit spending is good for the economy should 'absolutely' be part of the conversation

But the idea has also faced intense pushback from economists and pundits across the political spectrum, and a new survey showed that no mainstream economist is ready to sign on to the idea just yet.

In the latest survey of 42 of America's top economists by the University of Chicago Booth School of Business, not a single respondent agreed with the basic aspects of MMT:

  • Thirty-six percent of economists disagreed, and 52% strongly disagreed with the statement, "Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt." (Two percent had no opinion.)
  • Twenty-six percent of economists disagreed, and 57% of economists strongly disagreed with the statement, "Countries that borrow in their own currency can finance as much real government spending as they want by creating money." (Seven percent had no opinion.)

A number of the responding economists said that continued debt issuance would lead to persistent inflation problems and were concerned about the long-term sustainability of MMT.

SEE ALSO: The US national debt just pushed past $22 trillion — here's how Trump's $2 trillion in debt compares with Obama, Bush, and Clinton

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Facebook is reportedly under criminal investigation over deals that gave Apple, Amazon, and other companies access to user data (FB)

Wed, 03/13/2019 - 7:22pm

  • Facebook is under criminal investigation over data-sharing deals it signed with Apple, Amazon, and other major tech companies, reports the New York Times. 
  • The partnerships, first reported in June, gave those outside companies to data including friends lists, contact information, and even private messages — and not always with the user's consent.
  • Most of those partnerships have ended over the last two years. 
  • Facebook tells the Times that it is cooperating with investigators.

Federal prosecutors have opened a criminal investigation into data-sharing deals struck between Facebook and makers of mobile computing devices like smartphones and tablets, reports the New York Times

Under the terms of those deals, which the Times reported about in June, Facebook allowed device makers including Apple, Amazon, and Microsoft to access personal user data, including friend lists, contact information, and sometimes even private messages — and not always with the user's consent, the report alleged. 

According to the New York Times report, a grand jury in New York has already subpoenaed information on these types of deals from at least two smartphone and other device manufacturers involved. 

“We are cooperating with investigators and take those probes seriously,” a Facebook spokesperson told Business Insider. “We’ve provided public testimony, answered questions and pledged that we will continue to do so.”

News of the criminal investigation is the latest in a series of controversies surrounding the 2-billion member social networking giant. Facebook has been struggling to rehabilitate its public image amid revelations that it allowed Cambridge Analytica to improperly access the personal data of many of its users and the growing evidence of how its social network has been used to spread misinformation during the 2016 US Presidential elections.

Facebook's stock declined 1.5% in after hours trading on Wednesday. 

As if to underscore the company's challenges, Facebook's social network suffered one of the worst technical outages in its history on Wednesday, leaving users and advertisers unable to access the site for much of the day. 

Focus of the criminal inquiry is unknown

Facebook is already facing the prospect of multi-billion dollar fines to settle privacy investigations by the Federal Trade Commission and other agencies. But a criminal investigation would raise the stakes significantly.

Wednesday's Times report, which cited anonymous sources, said it was not clear what exactly the grand jury inquiry  overseen by federal prosecutors is focused on, or when it began.

In December, following the Times report, Facebook said in a blog entry that these partnerships were necessary to enable certain social features in outside apps, like logging into a Facebook account from a Windows phone, or sharing what Spotify song you were listening to via Facebook Messenger. 

"To be clear: none of these partnerships or features gave companies access to information without people’s permission, nor did they violate our 2012 settlement with the FTC," wrote Facebook in that blog post.

Most of those partnerships have ended over the last several years. 

The United States Department of Justice declined to comment on the report. 

SEE ALSO: Facebook and Instagram go down for hours in major outage — and it says it's not being DDoS attacked

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Uber is talking to Softbank and Toyota about a $1 billion investment in its self-driving car business

Wed, 03/13/2019 - 6:48pm

  • Softbank's Vision Fund is in late stage talks to invest $1 billion into the ride-hailing giant's self-driving car unit, according to a person familiar with the matter. 
  • The deal would value the self-driving car portion of Uber as a business worth $5 billion to $10 billion.
  • Toyota is also in the consortium with Softbank discussing the investment, Reuters reported.

Uber is in "late stage talks" with SoftBank about a $1 billion or more investment into its self-driving car unit, a source familliar with the matter told Business Insider on Wednesday. The cash infusion would shore up one of Uber's costliest business ahead of its IPO, which is expected to happen this summer. 

The deal would value Uber's Advanced Technologies Group at $5 billion to $10 billion, the source said.

News of the funding round was first reported by the The Wall Street Journal, which said a major automaker was also involved in the discussions. Reuters later reported that Toyota is among the consortium discussing the investment with Uber,

Uber's Advanced Technologies Group is leading the ride-hailing company's efforts to develop its own self-driving technology, putting it in competition with Google spin-off Waymo and General Motors' Cruise. The effort has required hefty spending by Uber and created distracting problems, such as a trade theft legal fight with Waymo.

In 2018, Uber stopped testing its self-driving cars for nine months after one of its vehicles killed a pedestrian in Arizona. A Business Insider investigation found that the pressure to catch up with competitors led to Uber's self-driving group to make several questionable decisions before the fatal crash. 

Softbank is already the largest investor in Uber, following a $1.25 billion investment in January 2018 that gave it control of about 15% of the ride-hailing company.

The investment talks come as Uber is racing towards a public listing, with an IPO expected in the coming months. 

SEE ALSO: Uber insiders describe infighting and questionable decisions before its self-driving car killed a pedestrian

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Elon Musk said a Tesla car would be able to drive itself across the country by the end of 2017 — but it's 2019, and that still hasn't happened (TSLA)

Wed, 03/13/2019 - 5:59pm

  • In October 2016, Elon Musk said a Tesla vehicle would be able to drive itself across the country by the end of 2017.
  • It's now 2019, and a Tesla car has yet to drive itself across the country.
  • Musk now says he expects Tesla cars will be able to operate without any driver intervention by 2020.

In October 2016, Tesla CEO Elon Musk said on a press call that a Tesla vehicle would be able to drive itself across the country, from Los Angeles to New York City, by the end of 2017.

It seemed like an ambitious goal at the time. And it certainly turned out to be more ambitious than Musk, or Tesla, had expected.

In 2015, Musk said he expected a Tesla to be able to drive itself across the country by 2018. When he modified his statement in October 2016, it seemed like Tesla's autonomous-driving system was ahead of schedule.

Now, almost three years later, Tesla's driverless-car goals still seem far away — but Musk keeps making promises anyway.

Just last month, Musk said he was "certain" that Tesla vehicles would be able to operate without driver intervention by the end of 2019, pending regulatory approval.

"I think we will be feature-complete full self-driving this year, meaning the car will be able to find you in a parking lot, pick you up, take you all the way to your destination without an intervention — this year," Musk said in an interview with ARK Invest. "I would say that I am certain of that. That is not a question mark."

But Musk qualified this statement, too, saying updates to Tesla's driverless systems this year would still require drivers to pay attention to the road while Autopilot is active.

In terms of when consumers can expect Tesla cars to fully drive themselves without any driver intervention, Musk estimated in the interview that could happen by the end of next year. He also said both software updates would depend on regulatory approval.

Of course, building cars — and sophisticated car software that can sense its surroundings and make the right decisions to act accordingly — is an extremely difficult endeavor, one that Tesla and rival car companies are still pioneering. And Tesla has made great strides with its Autopilot system, which debuted in 2014. But given how Musk and Tesla continue pushing the timetable for fully autonomous driving, year after year, we wouldn't be surprised to see further delays to this particular goal.

We reached out to Tesla about its ever-changing timeline for self-driving cars. The company declined to comment.

SEE ALSO: Elon Musk wants to build a high-speed tunnel underneath Las Vegas, and it sounds like it's going to actually happen

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Boeing is sliding after Trump issued an emergency order to ground 737 Max planes (BA)

Wed, 03/13/2019 - 5:58pm

  • Boeing stock dropped more than 2% in trading Wednesday afternoon after President Trump ordered the grounding of the 737 Max aircraft.
  • The emergency order follows calls by a number of US lawmakers to ground the plane.
  • Watch Boeing trade live.

President Trump ordered the grounding of all 737 Max aircraft in the US Wednesday afternoon. Boeing's stock was down more than 2% on the news with the stock trading at its lowest levels since January 29.

The move to ban the plane follows calls by a number of US lawmakers to ground the plane on Tuesday, after two crashes of the 737 Max aircraft in the past five months.

Both Sunday's crash of an Ethiopian Airlines flight, which killed all 157 on board, and the fatal crash in October of a Lion Air flight in Indonesia, involved Boeing's 737 Max 8 plane.

More than a dozen airlines as well as the governments of China, Indonesia, Australia, and Singapore have grounded the aircraft. Boeing has more than 5,000 orders outstanding for the 737 Max 8 aircraft, which is expected to be a large driver of business in the years ahead.

The continued sell-off in Boeing will have an outsized impact the Dow Jones Industrial Index. Boeing commands a weighting of more than 10% of the Dow Jones Industrial Average. Boeing's volatility due to the 737 Max crashes has already caused the Dow to underperform the S&P 500 this year.

Boeing had previously driven 30% of the gain in the Dow this year

The Dow is a price-weighted index, meaning the company with the highest share price has the heaviest weighting. Even with Tuesday's losses, Boeing's stock price remained the highest in the index, at $366.

Unlike the Dow, the S&P 500 is weighted by market cap, meaning the largest company, Microsoft, has the heaviest weighting. By comparison, Boeing commands the 15th-biggest weighting of S&P 500 names.

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Wealthy parents are paying up to $1.5 million for consultants to help get their kids into college — and there are ways to do it that are completely legal

Wed, 03/13/2019 - 5:57pm

  • In an ongoing college admissions scandal, 33 parents have been accused of paying millions of dollars to fabricate their children's credentials during the college admissions process.
  • But there are other, legal ways the ultra-wealthy try to increase their children's chances of getting into an elite college.
  • This includes paying up to $1.5 million for college consultants or making donations of more than $10 million to the school their child is applying to, according to The New York Times.

On Tuesday, dozens of people were charged in a college admissions bribery scandal uncovered by the FBI. Among those charged are Hollywood actors, college athletic coaches, business leaders, and CEOs and executives in finance, real estate, and other industries.

Thirty-three parents are accused of paying a collective $25 million to William Singer, owner of the Edge College & Career Network, to boost their children's chances of getting accepted into an elite university.

Individual bribes reportedly cost as much as $6.5 million and fell into two schemes: having their children pose as athletes to become accepted into Division-1 universities or have stand-ins take SAT and ACT exams for their children.

Read more: CEOs, investors, and entrepreneurs are among those named in the college admissions cheating scandal — here are the 22 business leaders who've been charged by the FBI

According to a Department of Justice press release, Singer orchestrated the scandal, bribing coaches and university administrators or arranging for test stand-ins. According to charging documents, actress Lori Loughlin and husband fashion designer Mossimo Giannulli paid $500,000 to a fake nonprofit to have their daughters, Olivia and Isabella, designated as recruits to the University of Southern California's crew team, when neither daughter rowed crew.

How the super-rich can legally buy better chances for their kids

Not all college consultants operate illegally — there's a whole "shadowy" world where the super-rich can legally buy greater chances for their kids to be accepted into elite schools, reported Dana Goldstein and Jack Healy of The New York Times.

Parents can purchase a five-year package of college admissions consulting from Ivy Coach for up to $1.5 million, Goldstein and Healy wrote, adding that they might also pay $300 for a one-hour admissions expert consultation or make multi-millionaire donations to schools.

The latter tactic is common among wealthy parents trying to get their children into top-tier schools, reported Business Insider's Jacob Shamsian.

Consider Charles Kushner, who gave a $2.5 million donation to Harvard in 1998 shortly before his son, Jared — who reportedly did not have a high enough GPA or SAT scores — was admitted. Former Sony executive and current chairman of Snap Michael Lynton donated $1 million to Brown in 2013; his daughter was accepted not long thereafter.

But gifts in that amount may not cut it today.

"In recent years the costs of ensuring special treatment for an application have moved beyond comfortable reach even for the rich," Goldstein and Healy wrote.

Such donations need to be hefty — a mere $10 million is "an entry-level gift that might not even get the attention of the admission office," Steven Mercer, a private college consultant based in Santa Monica, told The Times.

SEE ALSO: Actresses Felicity Huffman and Lori Loughlin among dozens charged by FBI with participating in a scheme to get students into elite colleges

DON'T MISS: Here's how Lori Loughlin got her 2 influencer daughters with millions of followers into USC through an admissions scam, according to investigators

Join the conversation about this story »

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Delta just took another step toward devaluing its rewards, but I'm still convinced SkyMiles are worth having

Wed, 03/13/2019 - 5:30pm

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. Business Insider may receive a commission from The Points Guy Affiliate Network, but our reporting and recommendations are always independent and objective.

  • A few years ago, the Delta SkyMiles frequent flyer program stopped publishing an award chart.
  • Since then, there have been a series of devaluations of Delta SkyMiles, bringing the potential value of the currency down.
  • In the latest move, Delta One business class flights to Europe were raised to a minimum price of 105,000 SkyMiles each way — just one year ago, the baseline price was 70,000 miles.
  • Despite the devaluations, Delta SkyMiles are still worth collecting, and there are still some sweet spots within the program.

A few years ago, Delta's SkyMiles frequent flyer program removed its award chart from its website.

Since 2013, Delta has periodically devalued its frequent flyer currency. While this is fairly common for airlines, Delta's devaluations have been more frequent and aggressive, and were accompanied by Delta removing its award chart in 2015.

This week, Delta made its latest unannounced, no-warning devaluation. Beginning at some point over the past few days — and first reported by several blogs Wednesday morning — Delta raised the baseline "saver" prices across the board on Delta One (business class) flights between the US and Europe. 

Devaluations on business class flights to Europe

Just one year ago, these flights cost 70,000 SkyMiles each way at the evident saver level. They were raised to 86,000 miles briefly during the year, then rolled back to 82,000 miles. Now, the lowest price available is 105,000 miles for a one-way ticket. That represents a 50% increase in just around a year.

It's worth noting that this price only applies to flights operated by Delta. Flights on partner airlines like Virgin Atlantic and Air France still show at a minimum price of 86,000 SkyMiles, although this may change.

It's unclear whether this is a permanent price increase or if it will be rolled back; however, the continuous devaluation of SkyMiles is frustrating — especially for those who frequently fly the airline (disclosure: I am a Delta Medallion member). Personally, I enjoy using miles to for experiences I couldn't otherwise afford — like first or business class flights.

However, despite the devaluations of the SkyMiles currency — and the evident effort to drive them to a final, revenue-redemption-tagged value of 1¢ each — there are compelling reasons to keep collecting them, and to keep flying Delta if its your airline of choice.

Here's why.

First: How award travel usually works

In most cases, the cash price and the miles price of a ticket aren't linked. The cash price of a ticket might fluctuate up and down leading up to the departure date, but the miles price tends to be fairly consistent, and is based on a published award chart.

Each airline prices its award tickets based on slightly different things. American Airlines and United publish relatively simple award charts. When you look up a route (for instance, North America to Europe) you'll typically see at least two prices.

The first, "saver," is the cheapest. There are usually just a few of these seats available, and they may become open periodically between when the flight schedule is published and when the flight leaves. The second price, "standard" or "anytime," is typically much higher.

Because Delta doesn't publish its award chart, it's harder to figure out what's a good price for an award flight versus a bad price. However, the airline appears to still use a tiered chart to set award pricing — it just doesn't make the chart available to customers to reference. By paying attention to prices for particular routes can help you figure out the usual minimum, or "saver"-level price.

That's how this devaluation was spotted — by looking at the minimum available price across the schedule.

Credit card welcome bonuses and benefits

Delta has three different mainstream personal credit cards, as well as three business credit cards. That makes it easy to earn points through new membership bonuses. Each card counts as a separate product, so even though you can only earn each bonus once, you can earn three of them.

American Express, which issues Delta's credit cards, periodically runs promotions offering higher welcome bonuses, up to double the normal amount of points for new members who meet the requirements.

For example, AmEx is currently running one of those promotions until April 3. 

During the limited-time promotion, the Gold Delta SkyMiles® Credit Card from American Express offers 60,000 Delta SkyMiles when you spend $2,000 in the first three months. The Platinum Delta SkyMiles® Credit Card from American Express is offering 75,000 SkyMiles and 5,000 Medallion Qualification Miles when you spend $3,000 in the first three months. Delta's premium card, the Delta Reserve® Credit Card from American Express, also offers 75,000 miles and 5,000 Medallion Qualification Miles, although you'll need to spend $5,000 in three months.

Additionally, AmEx Membership Rewards points, the company's in-house rewards, can be converted into Delta SkyMiles.

The ease with which you can earn more SkyMiles from credit card rewards — let alone flying — helps offset the pain of devaluations. And that's without discussing the benefits Delta cardholders get on flights.

Learn more: Click here to learn more about Delta's three main personal cards

A constant stream of flash sales on award flights

Using SkyMiles to fly international business class to a specific destination with inflexible dates continues to be expensive.

For those with more flexibility, however, Delta has been offering a stream of flash sales on award flights, and some of the deals have been remarkable.

Deals have included round-trip flights to Europe for 32,000 SkyMiles in the main cabin, domestic routes like Boston to Nashville for 10,000 SkyMiles round-trip, flights to Asia for 30,000 SkyMiles round-trip, and many more. Flash sales even pop up sometimes for Delta One, such as 98,000 SkyMiles for round-trip business class flights to Europe. There are different deals every few weeks, and while some of them are middling, some are spectacular and offer a significantly outsized value.

If you have a degree of flexibility in your leisure travel plans, these flash sales make it worth keeping a store of SkyMiles on hand, ready to redeem.

Earn elite qualifying credits while paying with miles

A unique benefit that Delta offers its credit cardholders, Pay with Miles lets you redeem miles towards airfare at 1¢ each — for example, you can redeem 20,000 SkyMiles for a $200 ticket.

What's unique is that you'll earn Medallion Qualifying Miles — or MQMs — for the whole flight, even if you pay for the whole thing with miles. You'll also earn Medallion Qualifying Dollars (MQDs) and redeemable SkyMiles on any part of the base fare you pay for with cash.

This lets you get the best of both worlds: You can redeem miles for free (or discounted) travel, but still get MQMs to help you qualify for Medallion elite status the following year.

While the 1¢ per mile valuation isn't ideal, it can be rewarding on less-expensive, longer distance flights where you'd be missing out on MQMs by booking a normal award flight.

For example, last year I used Pay with Miles to fly to Europe on a fare that was around $425. I spent 40,000 SkyMiles and $25, but the MQMs I earned helped me break the barrier for Platinum Medallion status this year. To me, that was a worthwhile redemption.

Keep in mind that this is only available to cardholders, and is different from the Miles + Cash option that anyone can use. On that fare, you won't earn any MQMs, MQDs, or redeemable miles, even if you pay part of the fare with cash.

Reliability and satisfaction

Delta has a reputation for reliability and consistency, and according to the Wall Street Journal, that reputation is well-earned.

In the publication's annual rankings, Delta was the best US airline in terms of on-time arrivals, number of cancelled flights, delays, complaints, and mishandled baggage.

Anecdotal opinions of airlines are, by nature, subjective, but American Airlines and United frequent flyers tend to be less satisfied with overall service, according to JD Power rankings. Delta's SkyMiles program is ranked higher than the other two airlines of the big "US 3," despite the devaluations. Other factors and benefits, like service, benefits, and reliability, outweigh that negative.

Bottom line

Delta's SkyMiles devaluations are frustrating, especially for loyalists. However, there is still plenty of value to be found, and if you plan to stick with Delta anyway — whether because of the airline's reputation for reliability, or for other benefits of the SkyMiles Medallion program — there are effective ways to use SkyMiles, even with the devaluations.

Whether that continues to be the case — and whether Delta loyalists continue to stick with the airline as further devaluations take place — remains to be seen.

$95 annual fee: Click here to learn more about the Gold Delta SkyMiles card from Business Insider's partner: The Points Guy. $195 annual fee: Click here to learn more about the Platinum Delta SkyMiles card from Business Insider's partner: The Points Guy. $450 annual fee: Click here to learn more about the Delta Reserve card from Business Insider's partner: The Points Guy.

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

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Wall Street firm Wedbush settles with the SEC, which accused it of ignoring an employee's 'long-running pump-and-dump scheme'

Wed, 03/13/2019 - 5:00pm

  • Wedbush Securities will pay a $250,000 penalty and has agreed to be censured to settle a charge related to what the Securities and Exchange Commission described as an employee's "long-running pump-and-dump scheme."
  • The scheme targeted retail investors, the SEC said.
  • "After we filed our claim, Wedbush made significant changes aimed at reforming its practices to detect and report misconduct within its ranks," Marc Berger, director of the SEC’s New York Regional Office, said in a statement

The financial-services firm Wedbush Securities settled a charge with the Securities and Exchange Commission on Wednesday related to what the SEC described as an employee's "long-running pump-and-dump scheme targeting retail investors." The agency said Wedbush ignored the scheme and failed to properly investigate.

"Wedbush abandoned important responsibilities to its customers by looking the other way in the face of mounting evidence of manipulative conduct," Marc Berger, director of the SEC's New York office, said in a statement. "After we filed our claim, Wedbush made significant changes aimed at reforming its practices to detect and report misconduct within its ranks."

Wedbush will pay a $250,000 penalty, the SEC said, and has "agreed to be censured" to settle its charge of failing to supervise.

The SEC charged Wedbush in March 2018, saying the broker-dealer "ignored numerous red flags" that indicated the employee was involved in the long-running scheme.

The employee, Timary Delorme, who according to the SEC was an employee of Wedbush from 1981 to 2018, agreed last March to settle fraud charges stemming from the same scheme. 

At that time, the SEC called Wedbush a "recidivist broker-dealer," as the charge was the second SEC action against Wedbush in 2018 and the third since 2014.

"A considerable investment has been made by the Firm in supervisory systems and professionals, as well as in overall improvements to our compliance infrastructure. The result of this investment is one of many upgrades to our Private Wealth Management platform enabling Wedbush Financial Advisors to deliver continued improvements in client service," the company said in a statement.

Rich Jablonski and Gary Wedbush, co-presidents of the firm, said in a statement: "The Firm takes very seriously its responsibility to supervise our Financial Advisors and we are appreciative of the SEC in helping us identify insufficiencies in our detection and reporting procedures and systems. We are confident these issues are fully rectified."

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