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Here’s what Trump’s potential Federal Reserve pick says she’d bring to the central bank

Sat, 06/08/2019 - 6:17pm

  • Judy Shelton has advocated for drastically changing the way interest rates are set and going back to a Bretton Woods-type monetary system, policies she argued would set up optimal conditions for growth.
  • In an interview with Markets Insider, Shelton highlighted the importance of "fresh thinking" at the Fed.
  • "I think we have to say, what is the role of central banks in a productive economy?" she said. "And are they helping or hurting? I think it's legitimate to say, are they too dominant or does it turn out that they only serve a small segment of the private sector?

Potential Federal Reserve board pick Judy Shelton has indicated she would take an unconventional approach to monetary policy if nominated to the position, potentially raising questions she said would be helpful for the central bank to review. 

The New York Times and Bloomberg reported in May that Shelton is being vetted for the Fed, and she told Markets Insider she has been contacted by the Office of Presidential Personnel. She would potentially take one of two open seats on the Board of Governors. Filling those positions has been a challenge for President Trump, whose previous two picks withdrew from consideration following scrutiny from bipartisan economists and lawmakers.

Shelton, a former adviser to the Trump campaign and transition team, is a longtime critic of the Federal Reserve and what she has referred to as its "Soviet" power over markets.

"I think it's good to have fresh thinking and to challenge," she said in an interview with Business Insider. "It's hard to do."

"I think we have to say, what is the role of central banks in a productive economy?" she said. "And are they helping or hurting? I think it's legitimate to say, are they too dominant or does it turn out that they only serve a small segment of the private sector? And what is their interaction with governments and what is their impact on currency?"

Shelton has advocated for drastically changing the way rates are set, eliminating the interest the Federal Reserve pays on excess reserves that banks keep. She has also expressed support for returning to a Bretton Woods-type monetary system, which ended after the US dropped the gold standard in 1971. 

Those policies would set up optimal conditions for growth, she argues, even though they wouldn't be made immediately. 

"I mean I will say that within the current structure, I don't believe in just pulling the rug out from people and coming in and trying to blow it all up," she said. "I think consistency and moving toward a better place. I would want to be having the conversations, asking the Fed. And I'm very pleased to see the Fed is already doing this, going through self-evaluation."

Read the full interview with Shelton here:

The White House is said to be vetting Judy Shelton for a seat on the Fed. She told us what she would bring to a central bank whose policies she has long criticized.

SEE ALSO: TRANSCRIPT: Trump's potential Federal Reserve pick lays out what she would bring to a central bank she has long criticized

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Trump's potential Federal Reserve nominee wants a 0% inflation target

Sat, 06/08/2019 - 6:16pm

  • Potential Federal Reserve nominee Judy Shelton said she would be in favor of an inflation target of 0%, adding that it would offer stable price signals in the economy. 
  • The Federal Reserve currently targets 2% inflation, a level officials see as optimal for the economy.
  • Economists say that a 0% inflation target would leave the Federal Reserve with fewer tools to help the economy in the event of a downturn. 

Conservative economist Judy Shelton, who has emerged as a potential nominee for the Federal Reserve Board of Governors, said she would be in favor of an inflation target of 0%.

"My ideal would be zero," she said of her preferred inflation target in an interview with Markets Insider. "Stable prices mean stable."

Congress has set specific objectives for the Fed, including stable prices and maximum employment. The Fed currently targets 2% inflation, a level officials see as optimal for the economy.

"What would you really want to do is, the level of money and credit in an economy is calibrated to stable consistent price signals that are conveyed through time," she added. "That would be the ideal."

That would be a departure from current policy of setting a positive inflation target, which economists say is optimal in part because price changes are difficult to measure precisely.

"'Price stability' is vague, and has been interpreted as 2% partly because of the view that there remains a bias in price indices because of difficulty in incorporating quality improvements," said Menzie Chinn, an economist at the University of Wisconsin at Madison.

A 0% inflation target would leave the central bank with fewer tools in the event of a downturn and could eventually lead prices lower, according to Josh Wright, a former Fed staffer who is now the chief economist at iCIMS, a recruiting software company.

"Since inflation always has some volatility, a zero percent inflation target would likely mean that we would see deflation a significant amount of the time," he said. "Deflation disadvantages borrowers, so households that need to borrow to pay for college or housing would be hurt."

The New York Times and Bloomberg reported in May that Shelton is being vetted for a seat on the Fed, and she told Markets Insider she has been contacted by the Office of Presidential Personnel.

Read the full interview with Shelton here:

The White House is said to be vetting Judy Shelton for a seat on the Fed. She told us what she would bring to a central bank whose policies she has long criticized.

SEE ALSO: TRANSCRIPT: Trump's potential Federal Reserve pick lays out what she would bring to a central bank she has long criticized

Join the conversation about this story »

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The White House is stonewalling Congress left and right on everything from the environment to the Census

Sat, 06/08/2019 - 3:40pm

  • The White House has attempted to regulate the flow of information from current and former officials to various House Committees in recent weeks, the scope of which goes beyond the high-profile cases involving the Russia investigation and President Donald Trump's finances, according to multiple news reports.
  • Rod Schoonover, a State Department employee, had his written climate change analysis scrutinized by various White House departments, according to The Washington Post.
  • Schoonover was allowed to testify at a House Intelligence Committee hearing but was not allowed to submit his statement for the record, The Post reported.
  • The White House invoked executive privilege in late May and tried preventing former Kansas Secretary of State Kris Kobach from testifying about his discussions about a controversial 2020 census question with Trump, according to POLITICO.
  • Kobach testified before the Oversight Committee on Monday, but declined "more than 15 times" to answer questions about his talks with the White House, the Oversight Committee said in a memo.
  • Visit Business Insider's homepage for more stories.

The White House has attempted to regulate the flow of information from current and former officials to various House Committees in recent weeks, the scope of which goes beyond the high-profile cases involving the Russia investigation and President Donald Trump's finances, according to multiple news reports published Friday.

Rod Schoonover, a State Department employee and a former professor of chemistry and biochemistry at California Polytechnic State University, San Luis Obispo, was in the process of submitting a 12-page testimony on the "disruptive" effects of climate change to the House Intelligence Committee, The Washington Post reported.

But Schoonover's written testimony received heavy scrutiny from officials in the White House's Office of Legislative Affairs, Office of Management and Budget, and National Security Council, some of whom sought to delete portions that did not coincide with the Trump administration's position, numerous senior officials said to The Post.

"Climate-linked events are disruptive to humans and societies when they harm people directly or substantially weaken the social, political, economic, environmental, or infrastructure systems that support people," Schoonover's statement said.

"Absent extensive mitigating factors or events, we see few plausible future scenarios where significant — possibly catastrophic — harm does not arise from the compounded effects of climate change," Schoonover added, according to The Post.

The Trump administration has been criticized for scaling back efforts to address climate change and casting doubt on the association between the change in climate and human activity.

Schoonover was allowed to testify at the House hearing on Wednesday but was not allowed to submit his statement for the record, The Post reported.

Read more: Trump's Transportation Secretary Elaine Chao reportedly tried to bring family members to official meetings in China

Separately, the White House invoked executive privilege in late May and tried preventing former Kansas Secretary of State Kris Kobach from testifying about his discussions about a controversial 2020 census question with Trump, according to POLITICO.

The controversy stems from a potential citizenship question added to the upcoming census. The House Oversight Committee has since launched an investigation into the origins of the question, which Democrats say would "harm the accuracy of the Census" or call a Republican attempt to redraw congressional district maps in their favor.

In a letter to Democratic Rep. Elijah Cummings of Maryland, the chairman of the Oversight Committee, deputy White House counsel Michael Purpura reportedly described Kobach's conversations with Trump as "confidential," and said he would "not be permitted to discuss those conversations during a transcribed interview."

Meanwhile, Democrats balked at the executive privilege claim and asserted Kobach was not employed by the White House.

"Such a sweeping and baseless extension of the Executive Privilege doctrine not only frustrates the Committee's investigation but, taken to its logical end, would allow the White House to conceal its communications with lobbyists, special interest groups, and campaign donors," the Committee said in a letter to the White House in late May.

Kobach testified before the Oversight Committee on Monday, but declined "more than 15 times" to answer questions about his talks with the White House, the Oversight Committee said in its memo.

Commerce Secretary Wilbur Ross may be held in contempt of Congress for not turning over documents related to the question after being subpoenaed.

The Trump administration's efforts to curb the information from its current and former employees has been on display throughout the numerous congressional investigations. In May, Trump and the White House moved to defy House Democrats' subpoenas and blocked former White House counsel Donald McGahn from testifying before Congress.

Trump said his administration would be "fighting all the subpoenas" amid the congressional investigations: "We have been, I have been the most transparent president and administration in the history of our country by far," Trump said in late May.

In terms of invoking executive privilege the practice has ebbed and flowed over the course of history. According to the National Constitution Center in Philadelphia, "[e]very President to date has used this power in one way or another, although some have used it more famously than others."

President Barack Obama infamously used it once in 2012 (but it was overturned by a court); President George W. Bush used it six times; President Bill Clinton used it 14 times over the course of two major investigations (to varying degrees of success); President Richard Nixon, "was the one who really brought it to the forefront of American politics." Trump first invoked executive privilege on May 8, 2019, over the full report by special counsel Robert Mueller and its underlying evidence.

SEE ALSO: Trump's Transportation Secretary Elaine Chao reportedly tried to bring family members to official meetings in China

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A New York designer says luxury property isn't about how much money you spend, and it shows a major shift in priorities among the elite

Sat, 06/08/2019 - 11:15am

Luxury properties are no longer all about marble floors and French doors.

According to New York-based designer Andrew Kotchen, founding principal of architecture and design firm Workshop/APD, luxury is more about experience than aesthetic. Kotchen's firm has designed everything from urban lofts and homes to city buildings and restaurants across London, the Bahamas, Miami, Nantucket, Aspen, and New York City.

"It's about comfort," he said in a recent interview with Mansion Global. "A beautiful hotel, for example, is not luxury if it's not relaxing. It's not just about rich materials spread throughout. The world we live in thinks the more money you throw at it, the more fancy materials, the more luxury it is. It's not true."

He continued: "Certainly there are baseline conditions of quality and craft, but it's really an experience. That's what it means to me. It's not a place, a thing, or a product."

Read more: Outdoor yoga decks, private parks, and 'tranquility gardens' are the hottest new thing in luxury buildings, and it signals a change in status symbols among the wealthy

The focus on experiences explains why luxury condo developers are pouring money into "well-being" amenities. Consider boutique Los Angeles condominium 1030 Kings, which has an outdoor yoga deck, and Arbor18 in Brooklyn, which boasts not only a zen garden but also an infrared sauna with built-in chromotherapy.

It also explains why luxury buyers are downsizing, prioritizing quality over space. But the evolution of luxury real estate is part of a bigger shift in the overall luxury industry: The wealthy are increasingly spending money discreetly and on experiences instead of items that once signified status.

Entire industries are developing or adjusting their services to cater to consumers' heightened interest in the experience behind the brand. As Business Insider's Lina Batarags reported, "Wellness is increasingly regarded as a modern embodiment of luxury, and accordingly, an array of spas and studios offering treatments like cryofacials, weeklong retreats, and vitamin IV drips are delivering those experiences."

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I own a 3-bedroom, 2-bath house in South Daytona, Florida. Here's exactly what it costs every month.

Sat, 06/08/2019 - 11:00am

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.

  • Principal and interest payments are often only a small part of what it actually costs to own a home.
  • To get a good idea of what your home really costs, taxes, insurance, utilities, landscaping, and repairs all need to be taken into account.
  • Buying a home can be a great decision, but you'll want to make sure that you have realistic expectations of the financial obligations that will come with it.

Buying a home is a unique shopping experience. While it may be no problem keeping feelings out of the equation when shopping for groceries or insurance, buying a home can lead to strong emotions.

Because of this, it's easy to fall in love with a home before you even hear the asking price. It's also easy to plug numbers into any online mortgage calculator and convince yourself that the monthly payment would be manageable.

Need homeowners insurance? Our partner Policygenius can help compare coverage and rates »

Unfortunately, mortgage calculators can be incredibly misleading. They often don't take into account insurance, taxes, utilities, HOA fees, and the other "hidden" costs of home ownership.

With that in mind, I decided to take an inventory of all the expenses that are related to my home. The area where you live and the size of your home will obviously cause your costs to be different than mine. But this will at least give you an idea of the kinds of expenses that you may deal with as a homeowner.

What it costs to own my home

My wife and I live in South Daytona, Florida with our preschooler and toddler. We bought our home about five years ago for $90,000. It's a 3-bedroom, 2-bath home with 1,361 square feet of living space. Our home has a one-car garage and a nice-sized half-acre yard.

To get the full picture of what it really costs to own my home, I needed to consider three different types of expenses: monthly fixed costs, monthly variable costs, and quarterly or annual costs.

  • Our home's monthly fixed costs include the principal and interest on our home loan and taxes and insurance which are also included in our monthly mortgage bill
  • Our variable monthly costs include our electricity and utilities
  • Our quarterly or annual expenses include our quarterly pest control bill, annual termite bond renewal, and annual HVAC and riding-mower tune-ups

To find the monthly cost of owning my home, I began by averaging out all our variable expenses. For instance, to find our "average" electric bill, I added the 12 bills together and then divided by 12 to find that our average bill is $145.

And for quarterly or annual expenses I just divided them by four or 12. After punching a few numbers into the calculator, I had found what it costs to own my home on a monthly basis.

    • Principal and interest: $425/month
    • Taxes: $70/month
    • Insurance: $139/month
    • Utilities: $75/month
    • Electric: $145/month
    • Pest Control: $13/month
    • Termite Bond Annual Renewal: $8/month
    • Annual AC Check-up: $13/month
    • Riding Mower Annual Tuneup: $13/month
  • Total Monthly Cost: $901

Do you see now why mortgage calculators simply don't show the full story of how much it costs to own a home? My "other" expenses are more than double what I pay each month towards principal and interest.

And keep in mind that we don't have any HOA fees in our neighborhood and we don't pay for landscaping — two very common homeowner expenses.

The 'hidden costs' of home ownership

All the expenses listed above are ones that occur on a consistent basis. But even that list doesn't shed a true light on how much it costs to own my home.

When we first moved into our home, there were all sorts of things that had to be done.

We had to put on a new roof which cost us over $6,000. We also refurbished the wood floors, remodeled the kitchen, painted the interior and exterior, and purchased appliances. These are all things that you don't have to worry about when you rent.

Need homeowners insurance? Our partner Policygenius can help compare coverage and rates »

Another thing that you don't usually have to worry about when you rent? Landscaping. I mentioned earlier that we don't pay for a lawn service, which saves me a lot of money each month. But in order to make that possible, I had to buy over $1,500 worth of lawn equipment.

Finally, these numbers don't take into account the repairs that pop up without warning throughout the year. A few months ago our hot water heater gave up the ghost. And just last weekend, our garage door went kaput. Again, these are the types of things that the typical tenant doesn't need to worry about.

Despite the costs, I still love being a homeowner

After reading everything I said above, you may think that I hate being a homeowner. Nothing could be further from the truth. I love our home and I wouldn't go back to renting for the world.

But we also went into our home purchase with our eyes wide open. We fully expected that our home would cost more than our mortgage payment and we were prepared for that.

Before we even started looking at houses, we saved up a healthy emergency fund so that we could weather the storms (sometimes literally — remember, we live in Florida) of homeownership. And we made sure to buy a home that was 20% below what the lender told us we "qualified" for.

We wanted to make sure that we owned our home instead of our home owning us. By taking similar precautions, there's a good chance that you'll love being a homeowner, too.

Join the conversation about this story »

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There's a simple rule to follow to figure out how many credit cards is too many

Sat, 06/08/2019 - 10:30am

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.

  • How many credit cards you should you have? There's no definitive number, but finding the right amount for you boils down to a single rule.
  • Have as many as you want, as long as you're able to pay off each card in full, either on time or early, every month.
  • Your payment history is one of the most influential factors in your credit score, and falling behind on payments can wreak havoc on your credit, no matter how many cards you have or rewards you're getting.
  • Visit Business Insider's homepage for more stories.

I was terrified when I got my first credit card at 20 years old, and I was reluctant to get a second one a few years later.

It scared me to have the power to spend money I didn't technically have — until I figured out my system. Never spend more on the card than is currently in your bank account, even if there's a paycheck coming, and always pay off the entire balance before it's due. That became my spending mantra.

I have three personal credit cards now (not counting the authorized user card my parents set up to help me start building credit as a teenager). That's a good number for me, for two reasons: I can keep track of my spending easily, and I know I'll be able to pay off the full balance on every card when it's due. And I have a high credit score to show for it.

In the age of credit-card rewards, it's en vogue to build up an arsenal of plastic to maximize every purchase. I give many kudos to those who can manage multiple credit cards, endlessly wringing out rewards. But as Holly Johnson, a writer with 26 credit cards, explained on Business Insider, none of it matters if you're unable to maintain a high credit score and stay completely debt-free.

Read more: The best credit card rewards, bonuses, and benefits of 2019

If you're wondering how many credit cards is the right number for you, have as many as you want, if — and only if —you're able to pay off the entire balance on each card on time. We'll say that again for those skimming: You should be able to pay every credit card balance in full and on time.

Credit scores are based on a handful of factors, two of the most important being payment history and credit utilization. The hard inquiry that appears on your credit report when you apply to open a new line of credit is minimal in comparison to these two factors — and ultimately may even improve your credit — which is how people like Johnson and Business Insider's credit card rewards reporter David Slotnick can have 20-plus cards and great credit.

Payment history makes up a whopping 35% of your FICO score. Falling behind on credit-card payments is a slippery slope that can wreak havoc on your credit score. People with excellent credit have no record of late or missed payments in the last four years, according to a LendingTree analysis.

Credit utilization is how much of your available credit you're using each month. Ideally, this should stay below 10%, meaning you carry less than $1,000 in debt for each $10,000 in available credit you have.

Read more: I have 20 credit cards but I only carry 3 in my wallet. Here's how I choose which ones I can't go without.

If your credit utilization is too high — maybe you only have one or two credit cards and get close to your limit each month — consider opening a new card (and taking advantage of a stellar introductory bonus) or calling your bank and asking if you can apply for a credit limit increase on one of your existing cards. While a request for a credit limit increase will require a hard inquiry on your credit report, it's a relatively small impact outweighed by the improvement in your credit utilization.

All that said, we all fall on hard times financially. If you find yourself in debt at any point or simply with too many credit cards to manage, reduce your regular usage to just one or two cards. You may not need to cancel every card, as your credit score could suffer, but don't feel like you have to give every card air time. The most important thing is avoiding debt as best you can.

Join the conversation about this story »

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2 real-estate investors dish on why they think NYC's Billionaires' Row is not a good investment — and which luxury building they would consider buying in

Sat, 06/08/2019 - 9:33am

Billionaires' Row in New York City, an area surrounding 57th Street south of Central Park, has some of the most expensive real estate in the world. And the set of several ultra-luxury skyscrapers sprouting up there has already seen record-setting sales.

In 2014, Dell Technologies founder and CEO Michael Dell spent about $100 million on a penthouse in the One57 tower. And in January 2019, billionaire hedge-fund manager Ken Griffin dropped $238 million on a spread at 220 Central Park South. 

But as the US luxury real-estate market cools, the super-pricey Billionaires' Row condos may no longer hold the same appeal as investment properties.

Despite interest from superrich tech CEOs and hedge-fund managers, Billionaires' Row is not the best NYC neighborhood to invest in real estate, according to two full-time real-estate investors.

Richard and Monica Weinberg of the Terrace Tower Group in Australia started investing in New York City about a decade ago, focusing on properties in the $2 million to $15 million range.

"I believe the best neighborhoods, streets within, and property is where a New Yorker would want to live," Monica told Business Insider. "I prefer a hyper-local approach, concentrating on neighborhoods that have interesting histories and [are] well positioned to provide for current housing demand and capture future growth."

According to the Weinbergs, Billionaires' Row doesn't fit that bill.

"From my perspective, I do not believe Billionaires' Row would make for a good investment," Monica said. 

In Midtown, where Billionaires' Row is located, there's too much "traffic, noise, hassle, and retail," she said. "Midtown is great if you're in the city for a short while, but if I were to live there, I would most likely prefer the west side of downtown. The streets are smaller with a village feel and little pedestrian traffic."

Billionaires' Row has a glut of super-pricey condos in a slowing luxury real-estate market.

The ritzy area is a "tough micro market" due to an influx of inventory and other economic factors, the Weinbergs said. 

There certainly is a surplus of inventory on Billionaires' Row, where at least eight luxury towers — recently completed or to be finished in the next couple of years — are trying to sell similar ultra-prime real-estate at the same time in the same area. As Curbed New York recently reported, more than 40% of the pricey Billionaires' Row condos remain unsold, and some have been on the market for years, according to real-estate appraiser Jonathan Miller.

The luxury residential market in New York City is seeing a slowdown, as Crain's New York Business reported in October, with one contributing factor being that wealthy foreign buyers are less willing to drop millions on ultra-prime Manhattan real estate.

And on Billionaires' Row in particular, many condos have been selling at significant losses, The Real Deal recently reported.

The best investment neighborhoods are downtown, walkable neighborhoods like NoHo, the West Village, Tribeca, and Chelsea, according to the Weinbergs.

"My personal preference is for Noho, West Village, Tribeca, and Chelsea," Monica said. "Perry, West 12th and Leroy streets are also perfect examples. These areas have shown relative strength during times of weakness."

In those neighborhoods, the streets are smaller "with a village feel," she added.

If the Weinbergs ever choose a Midtown building to invest in, however, they would probably choose 220 Central Park South, where Griffin bought a $238 million penthouse.

"220, much like 15 Central Park West, has the best location directly across the park that I would prefer if living there," Monica said.

220 Central Park South remains Billionaires' Row's best-selling building, with an estimated 80% of its condos sold or in contract.

SEE ALSO: I spent a day on NYC's Billionaires' Row. Here's your ultimate guide to one of the city's glitziest streets, which borders Central Park and is home to the most expensive apartment ever sold in the US.

DON'T MISS: Billionaire Ken Griffin just bought a $238 million penthouse — and it's the most expensive home ever sold in the US

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We just got the latest evidence Trump's trade war is throwing a wrench in business plans

Sat, 06/08/2019 - 8:32am

  • Commentary from businesses around the US shows disputes between the US and key trading partners Mexico and China are chipping away at sentiment.
  • The Federal Reserve's latest Beige Book, a report that takes the temperature of economic conditions across districts, featured businesses' concerns about trade-related uncertainty.
  • "Outlooks were generally less positive than during the prior reporting period, with tariff and trade negotiations driving up uncertainty," the Dallas Fed said. 
  • Visit Markets Insider's homepage for more stories.

The Trump administration's trade disputes with critical trade partners are eating away at business sentiment and shaping decisions spanning states, sectors, and industries. 

That's according to commentary from businesses included in the Federal Reserve's latest Beige Book report, which monitors economic conditions across the 12 US Fed districts, published Wednesday.

"Trade uncertainty has delayed business investment, and tight labor markets have constrained expansion and spurred wage hikes," the Federal Reserve Bank of Philadelphia said. "Still, inflation remained modest, and the firms remained positive about the six-month outlook."

The central bank branches showcased local businesses' broad concerns about the way President Donald Trump's trade disputes with China and Mexico — and the uncertainty that comes with them — are injecting uncertainty into everyday operations.

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Despite threatening massive tariffs on Mexico for over a week, Trump announced Friday evening that the tariffs would be "indefinitely suspended" following negotiations with the country. Despite the declaration, Trump's economic threats seem to have spooked some.

"Outlooks were generally less positive than during the prior reporting period, with tariff and trade negotiations driving up uncertainty," the Federal Reserve Bank of Dallas said. 

Meanwhile, the three "negative" themes noted most often from businesses in the Federal Reserve Bank of Boston's district were "China, tariffs, and the semiconductor cycle; the three are related but distinct issues according to contacts."

"For example, Chinese cellphone manufacturers are big consumers of semiconductors so trade actions against them (as with Huawei, for example) are a big negative for semiconductor-related firms," the Boston Fed said. 

The central bank's Boston branch also highlighted issues within the automobile industry. Economists and market strategists up and down Wall Street have warned investors in the past week that Trump's threatened tariffs on Mexico could have had a disastrous impact on the industry.

Read more: 'Mayhem,' 'Crippling,' 'Serenity now': Trump's threatened tariffs on Mexico would spur chaos, Wall Street warns

"Another area of weakness is autos; a firm supplying capital equipment to the auto industry said investment was depressed because uncertainty about trade policy has delayed new model launches," the Boston Fed said.

Businesses in the New York and Cleveland manufacturing and distribution sectors are also grappling with the trade war's implications, the Beige Book showed. 

"Some businesses expressed ongoing concern about trade uncertainty, tariffs, and the increase in New York State's minimum wage," the New York Fed said.

Meanwhile, its Cleveland counterparts said, "Many contacts are concerned that the increased tariffs on goods traded with China will further exacerbate softening manufacturing activity in China, leading to less demand for American products from Chinese manufacturers."

And the Federal Reserve Bank of Atlanta said businesses in its district's transportation industry have begun taking precautionary measures to cut back on capital expenditure as a direct result of Trump's tariffs.

Read more: An increasing number of major US companies are warning that tariffs may force them to raise prices

"Regarding trade policy uncertainty, some transportation contacts developed contingency plans to reduce capital expenditures and headcount to offset tariff-related revenue shortfalls," the Atlanta Fed said. 

Another major theme evident in the Beige Book was the issue of reported labor shortages amid ultra-low unemployment. The US unemployment rate held steady at 3.6% in May, the Bureau of Labor Statistics said Friday.

Despite Trump's threatened tariffs on US imports from Mexico, stock-market investors this week took the development in stride, as the Dow and the S&P 500 logged their best weeks of the year.

Still, the trade war remains a significant wildcard for the market.  

"Financial market participants noted increased volatility and generally attributed it to investor concerns about the outcome of international trade negotiations," the Federal Reserve Bank of New York said. 

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The downfall of Finn; WeWork's pitch; Bank of America's cloud journey

Sat, 06/08/2019 - 8:02am

 

Dear readers,

It seems like the bank that could do no wrong...finally did. 

Despite the ups and downs of the market, JPMorgan's businesses have stayed remarkably consistent. It picked up more share in trading last year than other bank and its share price also performed  rivals by a wide margin. 

But as JPMorgan proved this past week, it isn't perfect. The bank said on Thursday that it was scrapping Finn, its online bank geared towards millennials, after a year. JPM has instead decided that it will focus on attracting young savers through Chase, its primary consumer brand. Existing Finn customers will be transferred to Chase accounts.

If you're new to the Wall Street Insider newsletter, you can sign up here.

It's a remarkable about-face for a bank that was believed to understand millennials better then well, anyone.  JPMorgan in 2016 famously cracked the credit-card code with millennials, launching the Chase Sapphire Reserve, which became an instant phenomenon and helped ignite an all-out rewards battle among credit-card companies.

When Finn launched, JPMorgan said it had designed the product "by working closely with millennials for more than a year" to understand their unique money challenges and what influences their spending.

"When it comes to money, millennials told us they don't want to feel like they're being judged," said Bill Wallace, CEO of Digital at Chase said at the time. "So, we designed Finn to put them in charge, no matter where or how they're spending."

But solving digital banking for the younger generation proved more challenging, and Finn's run was short-lived.

We also spoke to several Wall Street experts who said they weren't surprised about Finn's downfall and all voiced uncertainty around the decision to create a separate brand in the first place.

"Who is Finn? Nobody knows who it is," Alyson Clarke, principal analyst at Forrester, told Business Insider. "It takes time to build that brand recognition and emotional connection."

Finn also didn't offer some of the popular benefits commonly found on other startup banking apps. The checking account earned no interest, and the rate on the savings account was poor compared to rivals. Finn only offered as much as 0.04% for customers with more than $25,000 in savings, while many digital competitors, including Goldman Sachs' Marcus, offer in excess of 2%— 50 times more generous.

Finn's fall offers a cautionary tale to big banks who may think they they can capture the hearts and minds of younger savers just because they have scale. Brand differentiation matters, and if Wall Street isn't able to create something for millennials that is materially better than their core existing product, users aren't likely to follow. 

You can check out the rest of our JPMorgan coverage here. 

Have a great weekend! 

Olivia

WeWork's CEO says the way it rents out office space makes companies' financials look better. Some experts aren't sure how legitimate the pitch is.

In a recent Business Insider interview, WeWork's co-president and founder Adam Neumann said that an accounting change will make WeWork a more desirable place for potential customers to move to.

But accountants and commercial real estate executives aren't sure that Neumann's pitch will actually stand up to these guidelines. Instead, they said companies are more likely to switch to WeWork for culture, flexibility, and cost savings, not the accounting advantage.

READ MORE >>

Billionaire investor Stanley Druckenmiller says there should be only '200 or 300' hedge funds, not thousands — and he expects a culling of the herd

The billionaire Stanley Druckenmiller told an audience Monday night that the hedge fund industry would continue to contract and that fees would continue to shrink because there were only "five to 10" people worth paying premium fees for.

Druckenmiller, who converted his hedge fund into a family office in 2010, said there should be only "200 or 300" in existence.

READ MORE >>

Rockefeller Capital expects to have almost doubled its assets to $35 billion in Greg Fleming's first 21 months as CEO. He highlights the 2 trends shaping the industry.

Greg Fleming, the former president of Morgan Stanley and Merrill Lynch, took over Rockefeller Capital Management in March 2018, when the company had $18 billion in assets. He said on Tuesday that by year-end, the company should have about $35 billion. By 2023, he wants to hit $100 billion.

Fleming highlighted two factors reshaping wealth management: digital tools and the coming wealth transfer from baby boomers to younger generations.

READ MORE >>

Bank of America is putting the finishing touches on a 7-year cloud journey its CTO says has saved the bank billions and improved customer interactions

One of the biggest banks in the world is enjoying significant savings to its tech spend thanks in large part to its decision to build out its own private cloud.

Howard Boville, Bank of America's chief technology officer, told Business Insider the bank will save $2.1 billion in infrastructure costs in 2019, a large part of which comes from moving a majority of its workloads from traditional on-premise servers to its private cloud.

READ MORE >>

A $10.5 billion fund at Josh Friedman's Canyon Partners has loaded up on cash amid a shaky stock market

Canyon Partners' $10.5 billion flagship fund has spent the last 12 months pulling back from equities and filling its portfolio with cash, according to the fund's first quarter letter to investors.

The Los Angeles-based manager, which is run by Josh Friedman and Mitch Julis, told investors that the Value Realization's portfolio is now nearly a fifth cash — 18%, to be exact — as of the end of the first quarter. After 2018's first quarter, the fund's portfolio held no cash. 

"[The fund] is now characterized not only by less exposure, but also by less risky exposure," the letter reads.

READ MORE >>

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Tech VCs are squabbling over a popular type of funding for startups that one prominent investor calls a 'nightmare' and a 's**t show'

Sat, 06/08/2019 - 8:00am

Silicon Valley's venture capitalists are arguing about money.

They're not squabbling about whose startup is worth more, or whose fund posted better returns. The source of strife is something called a "safe," a specialized type of investment in early-stage companies that has become increasingly prevalent in recent years, much to the dismay of some longtime VCs.

One of these VCs, prominent investor Fred Wilson, went on the attack last week and called safes fundamentally flawed and unfair to founders.

"I was reminded yesterday how much of a shit show raising seed capital via SAFE notes is," Wilson wrote in a blog post. 

Though he did not provide details about the specific incident that earned his ire, Wilson re-published an earlier post of his outlining his case against safe notes. 

"They can build up, like a house of cards, on top of each other and then come crashing down on the founder(s) at some point when a priced round actually happens," Wilson wrote. 

The debate may seem esoteric and parochial, but it has big implications for the startups vying to become the next Facebook and for the entrepreneurs putting everything on the line for a promising business idea.

So what exactly is a safe, and why are the Valley's VC feuding about it? 

Safe funding deals are quicker and simpler than convertible debt

Safe stands for simple agreement for future equity. It is basically a promise that an investor has the right to purchase a startup's shares at a fixed price at some point in the future in exchange for providing the startup with funding today. 

The safe was created by startup accelerator Y Combinator's Carolynn Levy in 2013 as an alternative to convertible notes. The difference is that the safe is pure equity, whereas a convertible note is "fundamentally a debt instrument," according to Levy. 

Convertible notes are a form of debt financing that act similarly to loans and are considered relatively complex, lengthy legal agreements. Convertible notes carry interest that a founder needs to pay back to the borrower — the investor — once they exercise the options, typically in the Series A round following the seed funding, either in the form of additional shares or in cash repayment. 

Around 2013, it was clear that entrepreneurs and potential investors were looking for a simpler way to secure funding without all the risk that comes with debt financing. So Levy introduced the safe, an alternative that promised investors shares and partial ownership of the company in exchange for funding.

"The safe converts based on the occurrence of an event, whether it's an equity financing or a change of control transaction, in which case the money invested converts into shares of stock (or may convert into the right to receive cash, as can happen in the change of control)," Levy told Business Insider via email.

The turnaround on a safe is much quicker than convertible notes or other, more traditional forms of financing because important details like valuation and how much of the company the founder owns are essentially punted to later funding rounds. A typical safe checks in at around only five pages, according to Y Combinator.

Now, they're all the rage among many startups and VCs.

"Pretty much 100% of YC's founders raise money on safes so I haven't really thought about convertible notes in a while," Levy said.

Unpleasant surprises down the road

But not everyone shares Levy's enthusiasm. That's because the things that make safes so quick and easy can become problems down the road.

In particular, these safe investments don't address the startup's valuation and the dilution a founder takes to make space for the investor, issues that get tricky if all parties aren't on the same page during initial talks. A founder may not realize exactly how much of their company they have signed away. 

"When these notes convert, the math can be surprising and complex if there are multiple caps, making founder ownership incredibly hard to understand," Trae Vassallo, founder of early investment firm Defy.vc and Kleiner Perkins alum, told Business Insider.

For that reason, Vassallo says, her firm encourages entrepreneurs to set fixed terms on all rounds, even in the early days. 

Wilson noted in his post that his firm, Union Square Ventures, has done both equity and debt financing, and that the founder's choice of funding strategy wouldn't stop the firm from investing in a company they are interested in.  

But he believes that the problems that come with safes outweigh any benefits.

"They put the founder in the difficult position of promising an amount of ownership to an angel/seed investor that they cannot actually deliver down the round when the notes convert," Wilson wrote. "I cannot tell you how many angry pissed off angel investors I have had to talk off the ledge when we are leading a priced round and they see the cap table and they own a LOT less than they thought they did."

For her part, Y Combinator's Levy says some of the criticism is due to the novelty of safe notes and the perceived risk compared to debt financing.

"I'm sure there are investors (particularly non-Silicon Valley investors) who prefer notes because they are more comfortable with debt – if something goes wrong at the company, an investor with a note is treated as a creditor, and creditors take before stockholders in the event of a dissolution," Levy said.

But Wilson says he'd rather move away from convertible and safe notes and return to the VC industry's traditional equity financing model, with lawyers, fixed terms, and transparent dilution so a founder knows exactly what they've signed up for.

"As I wrote seven years ago, the cost of doing a simple seed equity deal has come way down," Wilson wrote. "It can easily be done for less than $5k in a few days and we do that quite often"

SEE ALSO: Recruiting-software startup SmartRecruiters just raised $50 million at a valuation above $300 million. See the deck that sold Insight Ventures on leading the startup's Series D.

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Investors are leaning on the Fed to keep the stock market’s rally alive. Here’s why they’re in for a rude awakening.

Sat, 06/08/2019 - 6:05am

  • Traders are pricing in near-100% odds that the Federal Reserve will cut interest rates before the end of the year.  
  • The prospect of lower borrowing costs for companies, along with easier monetary conditions, has lifted the stock market.
  • But some experts warn that investors aren't paying enough attention to the underlying reason why the Fed would cut rates: A slowdown in the economy caused by trade wars.
  • Visit Business Insider's homepage for more stories.

Just a few months ago, many on Wall Street were confident that the Federal Reserve would be able to pull off three or four interest-rate hikes this year. 

But how quickly the tides have turned. Now, more than ever before, investors and economists are betting that the Fed will cut rates a few times before the year runs out. Traders see a 90% chance of a rate cut in July, and a 98% chance at the September meeting, according to Bloomberg's world interest rate probability.

Somewhat counterintuitively, this helps explain why stocks just had their best week of the year. After all, a Fed cut would lower corporate borrowing costs and prolong the accommodative environment that has fueled this bull market. 

The May jobs report released on Friday jacked up expectations for a cut even more because it showed that growth in the US labor market may have stalled, giving the Fed reason to lower rates.

Shouldn't the prospect of the first rate cut since 2007 worry investors? Apparently not, judging from last week's price action, as investors focused instead on the easier monetary conditions that may be on the horizon. 

But some experts are worried that the market isn't adequately reflecting the reason why the Fed would cut interest rates in the first place: An economic slowdown triggered by trade wars

"While we are projecting 75bp of rate cuts in the US over the next 12 months, we don't think that this will prevent a sharp slowdown in the economy," said John Higgins, the chief markets economist at Capital Economics, in a note on Friday.

He continued: "Indeed, we expect prior monetary tightening, as well as the fading fiscal boost, to be a drag on activity. What's more, we suspect that the US-China trade war will continue to escalate, and that a 5% tariff will be imposed on imports from Mexico. That would provide an additional headwind to growth."

Under these circumstances, Higgins and his team are of the view that expectations for earnings growth are too high. All in, they expect the stock market to fall 20% from here. 

Read more: Investing legend Stanley Druckenmiller reveals why the 'best economic predictor' has him worried about the next crisis — and breaks down where you should be putting your money

The biggest recession risk 

The US is set to impose a 5% tariff on all goods imported from Mexico beginning on Monday June 10. Those tariffs would be in addition to the 25% duties that the US has already slapped on certain Chinese imports.

This escalating global trade war has now registered as the biggest risk to the US economy and the stock market's continued rally for many investors.   

Michael Hartnett, the chief investment strategist at Bank of America Merrill Lynch, says the S&P 500 could climb above 3,000 this summer before pulling back in the second half of the year. However, the biggest risk to this forecast is that "Trump opts to be 'Tariff Man' not 'Jobs President,' causing recession," he said in a recent note to clients. 

The second big risk he sees is a scenario where Fed rate cuts don't have their intended effect on financial markets. He's specifically eyeing the bond market, in a scenario where investors continue flocking to the safety of Treasuries even if the Fed cuts rates, thereby pushing down yields and widening credit spreads.  

Whether it's in the bond market or the stock market, investors may not be able to count on Fed rate cuts to keep the party going.

SEE ALSO: A duo of stock pickers crushing 96% of their peers unpack their tactics for finding companies that customers can't live without — and reveal their top picks

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NOW WATCH: Nxivm founder Keith Raniere began his trial. Here's what happened inside the alleged sex-slave ring that recruited actresses and two billionaire heiresses.

Facebook must do some 'deep soul searching' about Mark Zuckerberg's power after a huge shareholder revolt

Sat, 06/08/2019 - 4:35am

  • Some 68% of independent Facebook investors voted to oust Mark Zuckerberg last month, cementing a vocal campaign for the firm to appoint an independent chairman.
  • The tiny activist investor behind the vote, Jonas Kron, said it should be the catalyst for a period of "deep soul searching for the Facebook board."
  • He called on new board members — Jeff Zients, the CEO of investment firm Cranemere, and former American Express CEO Kenneth Chenault — to take particular note of investor unrest.
  • Investors have every intention of capitalizing on their momentum, and plan on continuing to press the issue with Facebook directors.
  • Visit Business Insider's homepage for more stories.

Facebook's shareholder revolt should provoke a period of "deep soul searching" for the company.

That's according to the tiny activist investor who has led the charge in the war on billionaire Mark Zuckerberg's enormous power over Facebook, the company he founded in 2004.

At Facebook's annual shareholder meeting last month, Trillium Asset Management put forward a proposal to oust Zuckerberg as chairman and replace him with an independent executive. Trillium controls Facebook shares worth around $9 million.

The proposal was backed by 68% of independent investors (up from 51% who voted in favor of an almost identical proposal in 2017), but ultimately defeated because of Zuckerberg's stranglehold on voting power.

There was also lower than usual support for lead independent director Susan Desmond-Hellmann, according to Trillium. She was reelected by 67% of outside investors, compared with 76% last year.

Jonas Kron, Trillium's senior vice president, told Business Insider the votes "provided a clear articulation of the deep concern among mainstream investors," which should provoke a period of "deep soul searching for the Facebook board."

He called on new board members — Jeff Zients, the CEO of investment firm Cranemere, and former American Express CEO Kenneth Chenault — to take particular note of investor unrest.

Read more: Facebook investors open new front in war on Mark Zuckerberg: Now they want an independent investigation into his 'outsized' power

"These are highly respected, well qualified, accomplished individuals. They are in a position to look at the votes and speak up as advocates for independent shareholders," Kron said.

Facebook has been quiet on the issue over the past two weeks, and did not respond to Business Insider's request for comment.

Earlier this week, a spokesman referred us to the firm's proxy statement, in which it said that hiring a chairman above Zuckerberg could create more problems than it solves.

"We do not believe that requiring the Chair to be independent will provide appreciably better direction and performance, and instead could cause inefficiency in board and management function and relations," Facebook said in the filing.

Meanwhile, in private correspondence with agitated shareholders, Facebook has pointed to governance changes made last year, when it beefed up the power of its audit committee, which is now chaired by Zients, giving it the power review the firm's services, privacy, and cybersecurity.

Kron said investors have every intention of capitalizing on their momentum, and plan on continuing to press the issue. New York City Comptroller Scott Stringer, who controls about $785 million worth of Facebook stock, went public this week with a call for Facebook to order an independent review of its governance structure, while it's likely there will be another proposal to oust Zuckerberg at next year's shareholder meeting.

"We're not hitting the breaks on this," Kron said. "Concentration of power is so misguided. It doesn't matter who the person is, it inevitably leads to bad decisions."

SEE ALSO: Facebook shareholder revolt gets bloody: Powerless investors vote overwhelmingly to oust Zuckerberg as chairman

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NOW WATCH: We had our earbuds tested for bacteria to find out if it's gross to share headphones

DEAL REACHED: Trump says upcoming Mexico tariffs will be 'indefinitely suspended'

Fri, 06/07/2019 - 8:46pm

  • President Donald Trump announced on Friday evening that the tariffs he threatened last week would be "indefinitely suspended" after negotiations with Mexico.
  • "I am pleased to inform you that The United States of America has reached a signed agreement with Mexico," Trump announced on Twitter.
  • Trump previously announced he would impose a 5% tariff on imports from Mexico, citing an influx of migrants "coming into our Country from Mexico."
  • The president in his recent announcement said Mexico had agreed "to take strong measures to stem the tide of Migration."
  • Visit Business Insider's homepage for more stories.

President Donald Trump announced on Friday evening that the tariffs he threatened last week would be "indefinitely suspended" after several days of negotiation with Mexico.

"I am pleased to inform you that The United States of America has reached a signed agreement with Mexico," Trump announced on Twitter. "The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended."

The announcement comes after US and Mexican officials began negotiating on Wednesday. Trump previously announced he would impose a 5% tariff, citing an influx of migrants "coming into our Country from Mexico."

Trump threatened the tariffs would increase to 10% in July, 15% in August, 20% in September, and 25% in October, if Mexico did not adequately take steps to lower the illegal immigration rate. Trump added at the time that the US will have the "sole discretion" in determining whether Mexico has done enough to "alleviate" the border crossings.

Read more: 2 maps show how every US state's economy could be affected by Trump's proposed Mexico tariffs

The president in his recent announcement said Mexico had agreed "to take strong measures to stem the tide of Migration."

"This is being done to greatly reduce, or eliminate, Illegal Immigration coming from Mexico and into the United States," Trump said in his tweet.

On Thursday, Mexican Foreign Secretary Marcelo Ebrard announced that his country planned to deploy 6,000 National Guard troops to the Guatemalan border in order to regulate the number of migrants.

"The United States looks forward to working alongside Mexico to fulfill these commitments so that we can stem the tide of illegal migration across our southern border and to make our border strong and secure," US Secretary of State Mike Pompeo said in a statement on Friday.

The US purchased $378 billion worth of Mexican imports in 2018, much of which were automotive-related items.

The proposed tariffs received a mixed reception. Some White House aides warned Trump not to impose the tariffs, fearing economic blowback and the possibility of scuttling trade deals that are currently in the works, according to The Washington Post. Leaders from the US, Mexico, and Canada, are working on the new North American trade agreement, which has yet to pass in Congress. Republican lawmakers in the Senate also expressed frustration with the proposed tariffs. Others, meanwhile, worried about the economic impact that could be felt by US businesses and consumers.

Meanwhile, some Trump officials backed the tariff proposal and pointed to the rising rate of migrants crossing the border in recent weeks. Over 100,000 migrants were apprehended at the US-Mexico border in April, the most in more than a decade.

"They need to step up their security efforts at their southern border," acting Homeland Security Secretary Kevin McAleenan said in a conference call last week. "They have natural chokepoints leading away from the border of Chiapas and Guatemala, into Mexico and on the way to the US."

SEE ALSO: 2 maps show how every US state's economy could be affected by Trump's proposed Mexico tariffs

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NOW WATCH: Fox News pundits are using white supremacist language tied to 'The Great Replacement' conspiracy theory

I drove an $86,000 Toyota Land Cruiser to see if the off-road legend could live up to its incredible reputation

Fri, 06/07/2019 - 6:15pm

  • The Toyota Land Cruiser dates back to the 1950s. Once a pure offroader, the full-size SUV became popular with suburbanites in the 1990s.
  • The 2018 Land Cruiser I tested hasn't been redesigned since 2007. But you have to ask yourself, "Does it need to be?"
  • It doesn't. This classic three-row beast might not be the fanciest SUV in the land, and Toyota is charging a lot for it. But if you can afford the sticker and the fuel, the Land Cruiser won't let you down.
  • Visit Business Insider's homepage for more stories.

The Toyota Land Cruiser is something of a dinosaur — even when compared with other hulking SUVs, such as the Cadillac Escalade and the Lincoln Navigator. It's been around since the 1950s, although the earliest examples were built and used for hardcore expeditions.

Much later, Toyota domesticated the truck a bit, without sacrificing its heritage. The timing was excellent, as the Land Cruiser was able to catch the 1990s SUV wave, appealing to suburban families and Explorers Club members alike. It's still around, and it's still perhaps the most rugged full-size, proper four-wheel-drive vehicle you can find to make soccer-practice runs.

It tends to be the SUV that pops to mind and Business Insider when we discuss what we'd drive to face down the apocalypse. We don't much care that the current generation has been in production since 2007. Why fix — or revamp — what ain't broke?

Toyota loaned us a 2018 Land Cruiser that, at $86,000, was very well-equipped. Yes, that sounds like a lot of money. But read on to find out why it's probably worth it.

Photos by Hollis Johnson.

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The 2018 Toyota Land Cruiser landed in the rugged terrain of Manhattan island wearing a "Magnetic Gray" paint job.

The color scheme mitigated the SUVs considerable bulk. It weighs 6,000 lbs. and is 16-feet long.

You fear nothing in the Toyota Land Cruiser. It fills space and then fills it some more.

The overall design isn't as brutalistic as some serious 4x4s, but the Land Cruiser has only been slightly domesticated. It's a great big, no-frills box with a giant motor up front.

The 18-inch alloy wheels came standard, part of a base price of $84,000. A few extras and a handling charge brought the as-tested sticker up to $86,000.

Up front, we've got LED headlights and an imposing yet not entirely intimidating chrome grille bearing the Toyota badge.

From the rear, you can see that the Land Cruiser rides tall. The version that Toyota has been building, with a few facelifts, for 12 years is the so-called "200 Series."

Time to get down to business. As with many three-row SUVs, even on this large one, the Land Cruiser has relatively modest cargo capacity with all three rows deployed: 16 cubic feet.

Drop the third row and fold the seats up sideways, however ...

... And capacity is greatly expanded. Max out the cargo area and you're talking about 82 cubic feet.

Let's pop the hood and see what powers this legend.

It's a 5.7-liter V8, making 381 horsepower with 401 pound-feet of torque. Towing capacity is just over 8,000 pounds, and the drive system is a true four-wheeler. Fuel is predictably dreadful: 13 mpg city/18 highway/15 combined.

The "Terra" interior combined mellow, earthy tones with dark, stately hues.

There's plenty of room in here. The Land Cruiser is a far cry from the Jeep-like vehicle that originated the line. Our tester was quite luxurious — and for almost $90,000, it should have been.

The appointments in the cabin are a bit more premium that what you'd see on, say, a Chevy Suburban and on par with a GMC Yukon Denali.

The instrument cluster has old-school analog gauges. And check out that lovely wood-trimmed steering wheel!

The Land Cruiser's power is routed to the 4x4 system via an eight-speed transmission. This control center is also where you can tweak the off-road setup.

The front seats are heated and cooled.

Our tester came with a cool box between the seats.

It's large enough to hold a few cans of soda.

The second-row bench seats provide ample legroom and headroom.

They're also heated. Second-row passengers can control their own climate.

The third-row is modest, but compared to some smaller crossovers, this space is adequate for adults.

The infotainment system runs on a nine-inch central touchscreen. It works fine, but it isn't as up-to-date as some competitors.

The navigation rendering is sort of crude. It handled direction perfectly well, however.

The system has a small suite of apps. Bluetooth pairing is easy, and there are USB ports for device connectivity. The 14-speaker JBL audio system also sounded quite good.

And if you actually want to investigate your scary MPGs, there's a screen for that.

With a truck this large, the overhead-view camera setup is a welcome feature.

So what's the verdict?

The Toyota Land Cruiser is one of the few SUVs that can genuinely perform double-duty as a semi-luxury suburb-mobile and a serious offroading chariot. You have to look at Land Rovers and Range Rovers, as well as some Jeeps and Mercedes, to achieve a similar package — and even then, the Land Cruiser is arguably the best combination of capability and comfort.

I mean, the Land Cruiser can go from dropping kids off at school to surviving a war zone. It's a very special vehicle.

Obviously, I could complain about the age of the platform. But Toyota is a conservative company and isn't going to mess with products that don't need to be messed with. The Land Cruiser's heyday for US sales was the 1990s, when there weren't that many large SUVs in the landscape. Nowadays, Toyota sells about a thousand a year, and they aren't cheap. So the company makes what I'm guessing is a nice profit margin with essentially zero new investment.

The Land Cruiser doesn't suffer, either. It literally gets the job done, no matter what. Even the infotainment system is acceptable (in the equivalent Lexus, the LX 570, it isn't). The main challenge with the vehicle is its physical size. It's a driveway filler, and if you don't have a huge garage, the fit could be tight. But if you're in the market for a full-size SUV, you've already come to grips with this.

In terms of a comparison, I tend to think of the Land Cruiser as being both more robust and more high-end than the Chevy Suburban, and about on par with the GMC Yukon Denali. The Land Cruiser is considerably more expensive than the Suburban, and as far as distinctions go, you're paying for the Toyota's reputation. On a day-to-day basis, the Chevy is competitive.

I wasn't able to test the Land Cruiser on anything other than paved roads. But to be honest, this SUV doesn't need testing. It's the best big offroader you can find that isn't specifically outfitted for the backcountry.

For normal-life operations, this Toyota shouldn't disappoint. Perhaps the key consideration is cost of ownership. It's fun to have a powerful V8 under the hood, but the pain at the gas pump could get to you after a while. I don't think anyone necessarily needs the Land Cruiser, as they might have a few decades ago, before crossovers were an option.

But if you want a large SUV that can tow plenty, haul anything you could think of, and that's nicely accessorized with some premium touches, the Land Cruiser is a fine choice. And if the apocalypse hits, you'll be covered.



Legendary short-seller Jim Chanos: Uber and Lyft went public because they had to, not because they wanted to

Fri, 06/07/2019 - 5:54pm

  • The billionaire short-seller Jim Chanos says the current market environment is similar to the dot-com bubble of the early 2000s but not as dangerous as 2008.
  • "I'm stunned at the number of huge loss-making enterprises," Chanos said at an event at the Indian Harbor Yacht Club in Greenwich, Connecticut, on Thursday night.
  • The founder of Kynikos Associates told the roughly 60 attendees that he thought some of the biggest unicorns that had gone public — like Uber and Lyft — did so only because they ran out of funding in the private markets.
  • For more stories like this, visit Business Insider's homepage.

The talk at the Indian Harbor Yacht Club on Thursday night was about cars instead of boats for a change.

The legendary billionaire short-seller Jim Chanos, who founded Kynikos Associates, spoke at the Connecticut Hedge Fund Association's second-quarter meeting in a fireside chat with the Fox Business reporter Charlie Gasparino.

Chanos, a well-known Tesla short, spent a good part of his hourlong conversation on the state of the market, comparing it to the dot-com bubble in the early 2000s. He told the roughly 60 attendees that the ride-hailing companies Uber and Lyft went public only because their funding had run out in the private market.

"It's not that they wanted to go public, but have to," Chanos said. "They were beginning to exhaust their funding from the VC and sovereign wealth funds."

Read more: Josh Friedman's $10.5 billion hedge fund has shifted to having almost 20% of the fund in cash, as it backs away from a shaky stock market

The two companies — which have stumbled in their public debuts — could not keep relying on private money because they were leaving the early-stage growth cycles favored by venture capital, Chanos said.

Representatives for Uber and Lyft did not immediately return requests for comment.

Even compared with the tech bubble, when companies like Ask Jeeves and Pet.Com rapidly grew in value, Chanos is "stunned at the number of huge loss-making enterprises" in operation.

"It's real money" they're losing every quarter, he said in astonishment.

Still, he thinks any similarities drawn to the 2008 financial crisis now are overblown, telling Gasparino that the economy is "not even close" to a "Lehman moment."

Read more: The CEO of SoftBank Investment Advisers, who runs the world's biggest venture fund, offers an inside look at how he picks which companies to lavish with billions of capital

The easy money that has been available to startups appears to be drying up, however, which indicates that investors may be concerned the Federal Reserve might hike interest rates — or even that there could be a prolonged economic slump. He specifically pointed to SoftBank, which has begun selling off some of its stakes in now-public companies like Alibaba.

"When the crazy drunken buyer of last resort becomes a seller, or has their drink taken away, then maybe there's a hangover coming," he said.

SEE ALSO: Billionaire investor Stanley Druckenmiller says there should be only '200 or 300' hedge funds, not thousands — and he expects a culling of the herd

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NOW WATCH: WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

The 1% has so much money they literally don't know what to do with it

Fri, 06/07/2019 - 5:49pm

  • The top 1% of earners are holding record amounts of money: $303.9 billion to be exact.
  • Despite growing income inequality, the richest households collectively have more than ever before.
  • The top 1% had only $15 billion just before the financial crisis, a fraction of what they hold a decade later.
  • Large companies are overwhelmingly and uniformly choosing not to reinvest much of it into their businesses; instead, they're hoarding it in cash and buying back stock.
  • Visit Business Insider's homepage for more stories.

A truly bizarre trend is having an impact on the economy — wealthy people and corporations have so much money they literally don't know what to do with it.

Why it matters: At a time when growing income inequality is fueling voter discontent and underpinning an array of social movements, the top 1% of earners and big companies are holding record levels of unused cash.

The big picture: US companies raked in a record $2.3 trillion in corporate profits last year, while the country's total wealth increased by $6 trillion to $98.2 trillion (40% of which went to those with wealth over $100,000).

So, where is all the money going? The IMF notes large companies around the world are overwhelmingly and uniformly choosing not to reinvest much of it into their businesses. They're hoarding it in cash and buying back stock.

"There are only 2 things that money can do — sit on a balance sheet unused, where it's just earned income earning an interest rate of zero," ICI chief economist Sean Collins points out. "Or it makes sense to release it to share buybacks or dividends."

  • Companies could pay their workers more, but "that would be terrible for the stock market," says Neil Shearing, chief economist at Capital Economics — half-jokingly.
  • Companies made a record $1.1 trillion in stock buybacks in 2018 and are on track to surpass that number this year. But they still have record cash holdings of close to $3 trillion.

Wealthy households and individuals are pouring money into asset managers, betting on companies that lose $1 billion a year, bonds from little-known Middle Eastern republics, and giving hot Silicon Valley start-ups more venture capital than they can handle.

But even that hasn't been enough to account for all the new money. The top 1% of US households are holding a record $303.9 billion of cash, a quantum leap from the under $15 billion they held just before the financial crisis.

How we got here:

  • The Fed's quantitative easing program pushed the cost of borrowing money to next to nothing for nearly a decade, allowing companies to splurge on debt for mergers and acquisitions and to boost revenue.
  • At the same time, globalization allowed them to reduce labor costs, meaning that gains effectively were returned as profit and used by public companies to boost stock prices.

Between the lines: These factors, combined with legislative policies that have consistently favored business owners over workers, eroded unions and reduced employees ability to demand higher wages.

  • The Tax Cut and Jobs Act  i.e., the Trump tax cut exacerbated these issues, slashing the share of US taxes that companies paid to its lowest level in at least half a century and provided companies even more capital for buybacks, dividends and executive compensation.
  • "Perhaps the fallacy of the tax plan to begin with was companies were not starved for capital coming into this," Mark Hackett, chief of investment research at Nationwide, tells Axios. "They were starved for growth opportunities."

The end result is money that would previously have been split between businesses, workers and the government for projects like schools, health care and infrastructure is instead sitting in corporate accounts earning little to no return.

Go deeper: How depreciating money could save the global economy

SEE ALSO: 20% of New York drivers for apps like Uber have had to rely on food stamps

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Uber shares slip after the company's operating and marketing chiefs step down (UBER)

Fri, 06/07/2019 - 5:12pm

  • Uber shares slipped late Friday after the company confirmed two executives were leaving. 
  • The company's chief marketing and operating executives are stepping down, CEO Dara Khosrowshahi told employees in an email.
  • Watch Uber trade live.

Uber shares slid by as much as 1.4% late Friday after the company confirmed two executives were leaving the company.

Barney Harford, Uber's chief operating officer, and Rebecca Messina, the chief marketing officer, are both stepping down, CEO Dara Khosrowshahi told employees in an email Friday.

Two longtime Uber executives are being promoted to fill the roles. Andrew Macdonald will lead operations, and Jill Hazelbaker, who currently runs policy and communications, will also lead the marketing department, according to a company filing. Khosrowshahi said the shakeup allows him to have a more direct hand in daily operations.

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In a filing with the Securities and Exchange Commission Uber also said Jason Droege, the head of Uber Eats, would begin reporting directly to Khosrowshahi. Macdonald will report to the CEO as well. Both will serve as co-managers of its Core Platform business segment.

The two departures come about one month after Uber's brutal initial public offering that saw the largest first-day dollar loss in a US-listed IPO on record. Shares have fallen by nearly 2% since pricing at $45. The stock closed out the Friday session at $44.16.

You can read the email Uber CEO Dara Khosrowshahi sent to emails detailing the moves here.

Graham Rapier contributed to this report.

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2 of Uber's top executives have left the company (UBER)

Fri, 06/07/2019 - 5:02pm

Uber's chief marketing and operations executives are out, the company confirmed on Friday. 

Barney Harford, Uber's chief operating officer since January 2018, and Rebecca Messina, chief marketing officer since October 2018, are both leaving. Bloomberg News first reported the departures.

CEO Dara Khosrowshahi announced their departures in an email to Uber staff Friday afternoon, a copy of which was provided to Business Insider by the company. He said the shakeup allows him to have a more direct hand in daily operations. 

"Barney and I have agreed that the COO role no longer makes sense, and he's decided to leave Uber," Khosrowshahi said. Barney is a talented businessperson, and I can't thank him enough for all of his contributions in helping get us to and through the IPO."

Read more: Goldman Sachs says Uber's business model is one of its biggest risks

In a regulatory filing with the Securities and Exchange Commission, the company said Harford would stay on until July to help with the transition. 

In 2018, Harford came under fire for his comments about an advertisement that features a mixed-race couple. The New York Times reported in July of that year that Harford voiced concern about "how common" the pairing was in markets where the ad was set to air. He also confused two of the black women in the ad because of similar hairstyles, the paper reported.

Harford later apologized for those comments, saying in a memo obtained by Business Insider that he was "embarrassed" about the insensitive comments. 

Thank you @dkhos for the opportunity over the last couple of years, and thank you to the broader team @Uber for being such an incredible & inspirational team to work with. It has been an honor. pic.twitter.com/tYkhyt8Eye

— Barney Harford (@barneyh) June 7, 2019

Messina is leaving the company without any major scandals. In an interview with Business Insider in September 2018, the Coca-Cola veteran said she was looking forward to assisting Uber in distancing itself from a scandal-ridden past.

I certainly think that we're on the brink of becoming one of the greatest icons in the 21st century," she said at the time. 

Here's the full text of Khosrowshahi's email, as provided by Uber: 

Over the years, I've learned that at every critical milestone, it's important to step back and think about how best to organize for the future. Given that we're a month past the IPO, now is one of those times, and I've been discussing this topic a lot with Barney and the leadership team.

We've made so much progress over the last two years, and Uber is in a far better spot both internally and externally. I now have the ability to be even more involved in the day-to-day operations of our biggest businesses, the core platform of Rides and Eats, and have decided they should report directly to me. This will allow me to be more hands on and help our leaders problem-solve in real time, while also ensuring that we make our platform vision a reality.

Given this, Barney and I have agreed that the COO role no longer makes sense, and he's decided to leave Uber. Barney is a talented businessperson, and I can't thank him enough for all of his contributions in helping get us to and through the IPO. Under his leadership, we've increased our focus on engagement with the launch of our rider and driver loyalty programs; improved the customer experience by eliminating tens of millions of defects through ContactLess100; and strengthened the critical partnership between our product/tech and business teams. On a personal level, I've appreciated his strategic mind, analytical chops, and unflagging passion and efforts for our mission. Barney will be around until July 1 to help me with the transition.

With this change to the COO role, I have decided to make a few additional changes:

Mac, one of our most tenured and talented leaders, will take on the Global Rides business, reporting to me. Reporting to Mac will be Pierre, Troy (CommOps), Gus (Safety & Insurance), Ronnie (U4B) and Mike (Product Ops). Pierre will now head up International Rides, adding LatAm to his scope in addition to EMEA and APAC, with George Gordon reporting to him. Sarfraz Maredia—who will take on US & Canada Rides—will continue reporting to Mac, and Brooks Entwistle will take on interim leadership of the Rides Business Development team under Mac.

Jason and the Eats team will now also report directly to me. And Zhenya Lindgardt, who recently joined Uber from Boston Consulting Group, will report to me and take on a new Platform Strategy & Customer Engagement role, focused on making sure we optimize our platform to realize its full growth potential and drive customer engagement across all our products.

Finally, it's increasingly clear that it's crucial for us to have a consistent, unified narrative to consumers, partners, the press, and policymakers. So I've decided to combine our Marketing, Communications, and Policy teams into one, led by Jill. Given this, Rebecca and I have agreed it makes sense for her to move on. In Rebecca's time here, she stood up our first global marketing organization and helped showcase the best aspects of our brand during our IPO. I'm so grateful for her energy and enthusiasm over the past 9 months, and I wish her all the best.

Given that Marketing is so important to our business, and our brand continues to be challenged, I have also decided to unify all marketers across Performance, Product, Rides, Eats, Safety, ATG, Freight, Nemo, and Employer Brand globally under Jill. Since joining Uber nearly four years ago, Jill has been instrumental in addressing some of our toughest challenges as a company. She's an excellent team builder and always committed to doing what's best for Uber. In order for Jill to dedicate more of her time to Marketing, she has asked two proven leaders to step up: Matt will lead Global Communications and Justin will lead Global Policy, both reporting to Jill.

There's never really a right time to announce departures or changes like this, but with the IPO behind us, I felt this was a good moment to simplify our org and set us up for the future.

As always, I'll be at the All Hands on Tuesday (from our DC office) to answer your questions. Until then, I ask that you support the leaders who have stepped up for the company, and keep your foot on the gas!

Uber on,

Dara

SEE ALSO: A Florida family says an Uber driver violated company policy and drove their daughter to a parking garage where she jumped to her death

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Stocks just posted their best week of 2019 after the bleak jobs report fueled hopes for a Fed rate cut

Fri, 06/07/2019 - 4:21pm

What trade war?

Stocks in the US jumped Friday, shrugging off concerns about an economic slowdown and placing major indices on track for their best week of the year. Investors interpreted a weaker-than-expected employment report as a sign the Federal Reserve would consider slashing its benchmark interest rate — a move that would at once signal the economy's historic expansion is losing steam but also benefit corporations by lowering their borrowing costs. 

The S&P 500 and Dow Jones Industrial Average each rose by 1%, and the Nasdaq Composite rose by 1.7% on Friday. The S&P, up 4.4% this week, and the Dow, up 4.7%, were tracking for their best weeks since November. Meanwhile the Nasdaq finished up 3.9% for its best week since December. 

Read more: US economy adds far fewer jobs than expected in May

"The market reaction to the weak US employment report for May suggests that investors are putting a lot of faith in the Fed and its ability to keep the economy strong," Andrew Hunter, a senior US economist at Capital Economics, told investors in a Friday memo.

To be fair, the market came off a pretty dismal month, so investors also swooped in to buy the proverbial dip. May was the market's first month of losses since December as President Donald Trump's trade disputes with key international trading partners knocked global equity prices around.

Some market participants doubt that US stocks can keep rallying on the prospect of a rate cut alone. They include Capital Economics' Hunter, who said investors are discounting signs that economic growth is slowing.

"We think that their hopes are misplaced, which is the key reason we expect the S&P 500 to fall sharply before the year is out," he said in a note on Friday.

The Trump administration's trade disputes with Mexico and China, the biggest trade partners to the US, remain a huge wildcard for investors of all stripes. And it's the very reason Federal Reserve Chairman Jerome Powell signaled earlier this week that an interest rate was not off the table for the central bank — a revelation that boosted stocks.

Read more: Fed's Powell signals he's open to a rate cut as Trump's trade wars escalate

Billionaire investor Stanley Druckenmiller, the founder of Duquesne Capital, suggested Friday in an interview on CNBC prior to the employment report's release that the Federal Reserve would factor a weak headline jobs number into its near-term outlook.

"I don't use the job numbers to predict the economy," he said. "It's just unbelievable the obsession with a lagging indicator. I use them for entry and exit points to fade. But I think if the job number is weak given everything else they're saying, the Fed will be on a clearer easing path by July."

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

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A Florida family says an Uber driver violated company policy and drove their daughter to a parking garage where she jumped to her death (UBER)

Fri, 06/07/2019 - 3:53pm

  • A family in Florida says their daughter used the Uber app to take a ride to a parking garage in Orlando where she jumped to her death.
  • Uber prohibits unaccompanied minors, but drivers say kids under 18 are a massive problem on the platform.
  • Many Uber drivers have told Business Insider that minors are a major problem on the platform, and that some drivers will take the rides even though they're against company policy.
  • The National Suicide Prevention Lifeline (1-800-273-8255) provides 24/7, free, confidential support for people in distress, as well as best practices for professionals and resources to aid in prevention and crisis situations.
  • Visit Business Insider's homepage for more stories

Uber expressly prohibits drivers from picking up unaccompanied minors.

If a Florida driver had followed those rules in January a 12-year-old girl would still be alive, her family says.

The Orlando Sentinel reported Thursday that the family of Benita "BB" Diamond is blaming Uber for their daughter's death earlier this year. They say the girl used her mother's phone to download the ride-hailing app, in which she used a prepaid gift card to request a ride 20 miles to downtown Orlando around 7 a.m. one morning.

After climbing to the top of the City Commons Parking Garage, she jumped to her death, her family says.

"I have her ashes in my necklace pendant here and that's all I have left of her unfortunately," the girl's mother, Lisha Chen, said at a press conference on Thursday. Video of the statement was published by the local news channel WESH.

An Uber spokesperson told Business Insider that the company was not aware of the issue until this week, despite the incident occurring six months ago, but is investigating in order to take appropriate action.

"If Uber had followed their policy, that would have been the one red flag that we would have caught," her father said at the press conference.

Unaccompanied minors, while prohibited from using the app, are a massive problem on Uber's platform, many drivers have told Business Insider. The company says that if a driver reports an underaged rider, the company will investigate the account holder and possibly ban them from the app.

"I'm increasingly getting pinged by parents to pick up their high school and junior high kids, which is against the rules," Jamie, a driver in Phoenix who asked that his last name not be published for privacy reasons, told Business Insider. "Most people do not know that you have to be 18 to ride in an Uber alone. When I turn the student down and tell them I can't take them, they just keep trying until they find a driver who does not care."

Benita's family has hired a law firm and is considering legal action against Uber.

"If she'd been asked, where's your mom and dad? We believe she would've been here," attorney Laura Douglas said at the press conference.

If you or someone you know is struggling with depression or has had thoughts of harming themselves or taking their own life, get help. The National Suicide Prevention Lifeline (1-800-273-8255) provides 24/7, free, confidential support for people in distress, as well as best practices for professionals and resources to aid in prevention and crisis situations.

SEE ALSO: Uber and Lyft drivers reveal the most annoying things that passengers do during rides

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