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MORGAN STANLEY: Delusional currency investors are making a huge mistake that could blow up in their faces — but these trades could save the day

Wed, 02/20/2019 - 12:22pm  |  Clusterstock

  • Hans Redeker, the lead global foreign-exchange strategist for Morgan Stanley, says investors are making a crucial mistake that could end up working against them.
  • As a result of this misconception, Redeker says, investors have temporarily moved more cash into the market, which is an unsustainable development.
  • Redeker says FX traders need to minimize their risks. He suggests building a hedged position through long and short positions on various emerging-market currencies.

If you're investing in foreign currencies and feeling good, a top strategist for Morgan Stanley says you might be missing a potentially damaging trend bubbling under the market's surface.

Hans Redeker, the head of global foreign-exchange strategy for Morgan Stanley Investment Management, says investors have started acting as if market liquidity is on the upswing when it's actually shrinking. And he warns that's not sustainable.

"Markets seem to be trading on an illusion of ample liquidity, with volatility at almost historic lows, gold prices rushing higher despite the US dollar remaining within a tight trading range and equities breaking higher as the bond market treads water," he wrote in a recent note to clients.

The problem is that liquidity isn't growing. Savings in Europe and Japan are down, while the Federal Reserve's balance sheet is shrinking, Redeker says. And of the 10 largest central banks, only Japan's is still buying assets and simulating the economy.

Read more: A wealth manager for the ultrarich explains why he’s advising clients to avoid stocks — and reveals where they should put their money instead

Relative to gross-domestic-product growth, Redeker finds that the balance sheets of those banks are falling at the fastest pace since 2008, around the time of the Great Recession.

"Market liquidity has not been supported by rising assets or increasing global net savings," Redeker said.

His view is that recent shifts by banks have encouraged investors to spend more cash, but several other factors are pushing liquidity lower. In his mind, that can't last, and neither, he said, can a rally based on that "illusion."

He continued: "These shifts can only be of temporary nature and are unlikely to promote a longer-term risk bull trend."

Redeker noted that investors were pleased when inflation forecasts started falling last year, but they're already on the rise as oil prices increase. At the same time, projections for corporate earnings growth are falling, with rising wages and other input costs a contributing factor.

Redeker, whose firm has $471 billion in assets under management, made a series of recommendations designed to minimize risks for investors who could get hurt by the backlash. His suggested positions include:

SEE ALSO: A JPMorgan heavyweight who advises a $1.7 trillion business explains why investors should look outside the US — and pinpoints the markets they should target

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Elon Musk said Tesla will make 500,000 cars this year — and then immediately backtracked (TSLA)

Wed, 02/20/2019 - 12:15pm  |  Clusterstock

  • Tesla CEO Elon Musk tweeted the company will make 500,000 cars in 2019, and then almost immediately retracted his claim.
  • "Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week," Musk said. 
  • In October, Tesla agreed to establish more oversight on Musk's communications. 
  • Also on Wednesday, Tesla confirmed its top lawyer is departing after less than two months with the company. 

Elon Musk backtracked, Tuesday evening, on claims he made about Tesla's expected 2019 production and deliveries.

Tesla's CEO originally tweeted that the automaker will "make around 500,000" cars in 2019, before correcting himself about four hours later.

"Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week," he said. "Deliveries for year still estimated to be about 400k."

Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.

— Elon Musk (@elonmusk) February 20, 2019

Musk's corrected comments echo numbers released by the company in a regulatory filing Tuesday when it said it expects to hit that rate "on a sustained basis by the end of 2019."

It's not the first time Tesla has set a goal of 500,000 vehicles. In 2016, the company said it expected to hit that number by the end of 2018. However, according to its annual report for last year, Tesla produced just over half of that goal, at 254,530 vehicles.

In October, Tesla and Musk agreed to establish a board committee to set controls over the CEO's communications as part of a pair of $20 million settlements with US officials.

Just weeks after that settlement, Musk openly mocked the Securities and Exchange Commission, calling the regulatory agency "the Shortseller Enrichment Commission" on Twitter.

Also on Wednesday, Tesla confirmed its top lawyer, general counsel Dane Butswinkas, is leaving the company after just two months on the job. Here are all the executives to depart Tesla in recent months. 

SEE ALSO: Amazon and General Motors are in talks to invest in a flashy new Tesla competitor

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A chief marketing officer who works with 12,000 luxury brands says consumers are caught up in 'logo-mania,' and it's helped a famously flashy brand make a huge comeback

Wed, 02/20/2019 - 12:04pm  |  Clusterstock

  • The Italian luxury fashion brand Gucci has made a comeback in recent years.
  • That's according to ModeSens' chief marketing officer, Krystle Craycraft, who works with 12,000 luxury brands such as Hermès and Louis Vuitton.
  • According to Craycraft, key factors for the brand's success include the revival of "logo-mania" and an interest in historic brands as both longtime and first-time luxury consumers want to invest in quality craftsmanship.

It's no secret Gucci has made a comeback.

As Krystle Craycraft, the chief marketing officer of the online fashion assistant ModeSens, put it, "Gucci has made a fabulous comeback, and they are maintaining it, which is kind of amazing."

The resurgence for the 98-year-old company arguably began in 2015, when its newly named CEO, Marco Bizzarri, hired Alessandro Michele as creative director. Its rise in popularity continued through 2018, when the company saw huge growth in online sales. Google's Year in Search report listed Gucci as No. 5 on a list of most searched fashion brands. In addition, previous Business Insider reporting showcased Gucci as one of the McKinsey Global Fashion Index's 20 major companies leading the global fashion industry.

Read more: Teens are obsessed with Gucci — and it’s giving the brand a big boost

Today, Gucci remains one of the hottest fashion brands in the world. Alongside the creative genius of Michele, credit for its popularity goes to millennials and celebrity promotion, along with the revival of '90s logo trends. Ruth La Ferla, who described logo-mania in her November New York Times piece "What Gives the Logo Its Legs," acknowledged Gucci as one of many brands contributing to the trend.

Craycraft said Gucci remained one of her company's most in-demand brands.

When asked about today's status symbol, she confidently answered with one of the brand's leading accessories: "We have been selling a lot of Gucci belts. It's always changing, but a lot of Gucci belts. People really love them, it's Gucci-mania still ... because it's an affordable piece, and logo-mania has been a trend over the past couple of years."

Gucci belts retail on the company's site beginning at $350 but can sell for upward of $1,000. Customers can also turn to sites such as Craycraft's ModeSens, along with the competitors Lyst and ShopStyle, all of which catalog locations in which belts may be available for lower prices.

"In terms of our consumer base, the majority of our consumers are high-end shoppers," Craycraft said, "but we do still have a contingent that are just buying that one piece or a couple pieces that they really just have to have, and Gucci belts seem to be the ticket for everyone, across all segments."

Alongside belts, the Gucci designs include logo T-shirts, sweatshirts, and bags. Bags range from classic purses with the brand's traditional dark green and red stripe to more trendy, boundary-pushing styles that use bright colors and velvet, something Business Insider's Jessica Tyler observed after visiting a New York store.

"I think that while Gucci has some pieces that are out there," Craycraft said, "they also have their timeless, classic bags — and even new styles that still feel timeless. Customers are gravitating towards those styles since they know if they invest in them, they will have those pieces for many years to come."

Despite its comeback, the brand has recently made headlines for one of the latest scandals in the fashion world. On February 6, Gucci issued an apology following the release of a $900 wool balaclava sweater that people said resembled blackface. The company removed the sweater from both in-store and online sales. Prada faced similar controversy in December for a charm that people said resembled blackface imagery.

SEE ALSO: Gucci just opened a luxurious complex complete with a boutique and a restaruant run by a three-Michelin-starred chef.

NOW READ: To complete for customers, luxury brands are borrowing a tactic banking and hospitality have been using for years

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NOW WATCH: Millennials and teens are making Gucci cool again. Here's how the brand nearly doubled its sales in 2018.

A star trader and US head of equity derivatives just quit Bank of America Merrill Lynch after less than 2 years at the bank

Tue, 02/19/2019 - 9:16pm  |  Clusterstock

  • Bank of America Merrill Lynch has lost a star in its stock-trading division.
  • Bill Hillegass, 35, is leaving his post as head of equity derivatives in the Americas after less than two years. 

A 35-year-old stock-trading star and head of equity derivatives in the Americas has quit Bank of America Merrill Lynch after a year and a half at the firm.

William "Bill" Hillegass ditched Barclays to run equity derivatives in the US for Bank of America in August 2017, but now he's leaving the bank to join a top buy-side firm, according to people familiar with the matter.

It wasn't immediately clear which firm Hillegass is headed to. 

A Bank of America spokeswoman declined to comment. Hillegass did not immediately respond to requests for comment. 

Hillegass is one of a slew of top equity derivatives traders to switch posts in the past year amid a rebound in the business and a war for talent.

As volatility surged back in early 2018 and stoked the derivatives markets, a merry-go-round of traders swapped seats at big banks. Bank of America, for instance, lost Ross Mtangi last spring to Credit Suisse, which hired him as global head of flow derivatives. Shortly after, the bank turned around and hired David Kim away from JPMorgan Chase

Some are predicting another rash of moves in equities now that bonuses for 2018 – a stellar year for equity derivatives revenues – have been announced or paid out at most banks, and Hillegass may just be the first domino to fall. 

The trader started his career at UBS in 2003, before joining Lehman Brothers in 2007 just prior to the financial crisis, according to his LinkedIn profile. Hillegass then spent eight years at Barclays.

This story is developing. 

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Beyond Bitcoin: Here are some of the new use cases for distributed ledger technology

Tue, 02/19/2019 - 9:05pm  |  Clusterstock

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

Of the many technologies reshaping the world economy, distributed ledger technologies (DLTs) are among the most hyped. DLTs are most often associated with cryptocurrencies like Bitcoin, but such coverage sidelines the broader use cases of DLTs, even though they stand to make a far bigger impact on the broader the financial services (FS) industry.

DLT's value lies in its ability to centralize record-keeping, while cutting out the need for authorization by an overseeing party, instead allowing a record to be confirmed by multiple parties with access to the database. This means DLTs have the potential to streamline financial institutions' (FIs) operations, boost data security, improve customer relationships, and drastically cut costs. But many FIs have struggled to implement DLTs and reap the rewards, because of organizational obstacles, but also because of issues rooted in the technology itself. There are a few players working to make the technology more usable for FIs, and progress is now being made.

In a new report, Business Insider Intelligence takes a look at what DLTs are and why they hold so much promise for FS, the sectors in which DLTs are gaining the most traction and why, and the efforts underway to remove the obstacles preventing wider DLT adoption in finance. It also examines the few FIs close to unleashing their DLT projects, and how DLTs might transform the nature of FS if adoption truly takes off. 

Here are some of the key takeaways from the report:

  • DLTs are proving attractive to FIs because of their ability to act as a single source of truth, distribute information securely, cut out middlemen, improve transaction times, and cut redundancy and costs.
  • DLTs like blockchain and smart contracts stand to save the FS industry up to $50 billion a year through improved operational efficiencies, reduced human error, and better regulatory compliance. 
  • The technology is being explored actively across FS, with trade finance, insurance, and capital markets proving especially active. Overall adoption is still low because of organizational and technical hurdles, but these are now being eliminated, promising to boost implementation.
  • A few FIs have pulled ahead of the curve and are very close to taking their DLT projects live, if they haven't already. These players can serve as useful case studies for other institutions in getting their DLT solutions live.

In full, the report:

  • Looks at what DLTs are, and why the FS industry is working hard to make use of them. 
  • Gives an overview of the financial segments which are seeing the most DLT activity, and what they stand to gain.
  • Outlines efforts being made to make DLT more approachable and usable for the FS industry.
  • Examines use cases in which FIs have managed to take their pilots live, and what they can teach their peers. 
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Bernie Sanders raked in more than $4 million in donations hours after announcing his 2020 presidential bid

Tue, 02/19/2019 - 8:05pm  |  Clusterstock

  • Ten hours after announcing he would run in the 2020 US presidential election, Sen. Bernie Sanders of Vermont raised more than $4 million from nearly 150,000 individual donors, the campaign said in an email on Tuesday.
  • Faiz Shakir, Sanders' campaign manager, could not confirm the exact amount on Tuesday afternoon but said in an email to INSIDER: "They're YUGE."
  • Sanders' figures set a new record for first-day donations in the 2020 race.
  • Sen. Kamala Harris, another 2020 Democratic candidate, previously held the title after raising $1.5 million from 38,000 donors within the first day of her campaign, Politico reported in January.

Ten hours after announcing he would run in the 2020 US presidential election, Sen. Bernie Sanders of Vermont raised more than $4 million from nearly 150,000 individual donors, the campaign said in an email on Tuesday.

Faiz Shakir, Sanders' campaign manager, could not confirm the exact dollar figure earlier on Tuesday afternoon but said in an email to INSIDER: "They're YUGE."

Sanders' numbers set a new record in first-day donations in the 2020 race.

Sen. Kamala Harris, another 2020 Democratic candidate, previously held the title after raising $1.5 million from 38,000 donors within the first day of her campaign, Politico reported in January. Harris' first-day campaign donations averaged $37, and the total amount is tied with Sanders' during his 2016 campaign.

"More than 100,000 people have donated to our campaign since we launched this morning," Sanders' Twitter account said on Tuesday afternoon. "Brothers and sisters, if we stand together, there is no limit to what we can accomplish."

Sanders confirmed he was running for president during an interview with Vermont Public Radio on Tuesday.

"I wanted to let the people of the state of Vermont know about this first," Sanders said in the interview. "And what I promise to do is, as I go around the country, is to take the values that all of us in Vermont are proud of — a belief in justice, in community, in grassroots politics, in town meetings — that's what I'm going to carry all over this country."

"I have been very blessed in my life with good health," Sanders added. "I'm very lucky that as a kid I was a long-distance runner, and I think I had and still have a great deal of energy. So I would ask people to look at the totality of who I am — my energy level, my record in the US Senate — and not just at one criterion."

If elected, Sanders would be 79 years old at the time of his inauguration and the oldest US president in history.

He joins a number of other Democrats who have declared their candidacies, including Sen. Kirsten Gillibrand of New York, Sen. Elizabeth Warren of Massachusetts, Rep. Tulsi Gabbard of Hawaii, former Secretary of Housing and Urban Development Julian Castro, Sen. Cory Booker of New Jersey, former Rep. John Delaney of Maryland, former state Sen. Richard Ojeda of West Virginia, the acclaimed author Marianne Williamson, and the former tech entrepreneur Andrew Yang.

SEE ALSO: Bernie Sanders announced he's running for president again, but there are 3 major challenges the Democrats will be facing heading into 2020

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Pre-IPO companies like Uber and Airbnb could 'test the waters' with investors sooner under new SEC proposal

Tue, 02/19/2019 - 7:46pm  |  Clusterstock

  • The Securities and Exchange Commission is taking new steps to help pre-IPO companies like Uber and Airbnb get feedback from institutional investors.
  • A new rule proposed Tuesday would let larger private companies consult with institutional investors before filing IPO paperwork with the SEC.
  • Currently, the rules let emerging growth companies talk with such investors about pricing and demand. But this excludes most companies with revenue over $1 billion, including many of the most valuable companies in Silicon Valley.

New rules proposed by federal regulators will let mega-startups like Uber and Airbnb seek early feedback about investor appetite for an initial public offering. 

On Tuesday, the Securities and Exchange Commission proposed a new "test the water" reform which would allow all pre-IPO companies to consult with qualified institutional buyers before filing paperwork to go public. 

These meetings give startups the chance to see if investors are actually interested in buying their stock before going through the work of filing with the SEC. And it helps institutional investors like Fidelity and T. Rowe Price the chance to see what's coming up in the IPO pipeline while setting the tone on valuation and price. 

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"It makes the process more informed," said Edwin O'Connor, a capital markets lawyer at Goodwin. "So when [companies] are ready to go to market, they have heard the investors' concerns and have the time to address it."

Currently, the privilege to chat with investors only extends to the smaller emerging growth companies, which excludes most companies with annual revenue over $1 billion. These so-called EGCs, which make up the vast majority of IPO registrants, have been able to get feedback on price and demand since 2012, when the Jumpstart Our Business Startups Act, known as the JOBS Act, was signed into law.

Larger private companies with revenue of more than $1 billion, however, must file an S-1 registration statement in order to be allowed to seek feedback from institutional investors. That would change, if the proposed rules become law.

"Everyone's been waiting for this," said Anna Pinedo, a securities lawyer at Mayer Brown. "It's been much anticipated, so it's great to see it out."  

An outsized impact on tech

Such reform could have an outsized impact in tech, Pinedo said, where startups are waiting longer and growing larger before tapping the public markets.

Ride-hailing service Uber, which is expected to go public this year, brought in $11.4 billion in revenue in 2018. Airbnb, another 2019 IPO prospect, announced that it brought in more than $1 billion in revenue in one quarter alone in Q3 2018. Both have too much revenue to count as an EGC.

While Uber and Lyft would not directly benefit from the new rules, as each has already confidentially filed IPO paperwork with the SEC, the new rules could come in handy for other startups reportedly weighing an IPO, such as Airbnb and Palantir. Depending on how the 60-day public comment period goes, the new rules could take effect as soon the end of April. 

This reform won't just impact pre-IPO unicorns, according to O'Connor. The proposal also gives public companies more flexibility when it comes to issuing new shares.

Currently, executives at public companies can chat with investors about raising more capital. But the banks underwriting these offerings can't. The reform would change that to allow authorized representatives to "engage in oral or written communications with potential investors." 

"[The reform] probably won't move the needle much on IPOs because for private companies, most won't need this," O'Connor said. "But I think it will help companies raise money after they're public. It might incrementally increase capital raising activity in the public markets." 

Though the SEC will take comments for 60 days before making the reform official, both Pinedo and O'Connor said they don't expect to see any opposition prevent this from happening.

"Lawyers' industries groups and trade associations have been talking about extending the 'test the waters' for a couple of years now," Pinedo said. "I doubt that there will be any opponents or natural critics for this."

If one were too oppose to reform, it would be on behalf of the investors themselves. And while many SEC regulations are designed to prevent investors from being mislead by the companies issuing securities, the new reform only impacts institutional investors.

"These are sophisticated investors," O'Connor said. "They can fend for themselves."

SEE ALSO: $1 billion video conferencing startup Zoom has picked banks but is sitting in SEC purgatory ahead of a planned IPO

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REGTECH REVISITED: How the regtech landscape is evolving to address FIs' ever growing compliance needs

Tue, 02/19/2019 - 6:03pm  |  Clusterstock

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

Regtech solutions seemed to offer the solution to financial institutions' (FIs) compliance woes when they first came to prominence around 24 months ago, gaining support from regulators and investors alike. 

However, many of the companies offering these solutions haven't scaled as might have been expected from the initial hype, and have failed to follow the trajectory of firms in other segments of fintech.

This unexpected inertia in the regtech industry is likely to resolve over the next 12-18 months as other factors come into play that shift FIs' approach to regtech solutions, and as the companies offering them evolve. External factors driving this change include regulatory support of regtech solutions, and consultancies offering more help to FIs wanting to sift through solutions. Startups offering regtech solutions will also play a part by partnering with each other, forming industry organizations, and taking advantage of new opportunities.

This report from Business Insider Intelligence, Business Insider's premium research service, provides a brief overview of the current global financial regulatory compliance landscape, and the regtech industry's position within it. It then details the major drivers that will shift the dial on FIs' adoption of regtech over the next 12-18 months, as well as those that will propel startups offering regtech solutions to new heights. Finally, it outlines what impact these drivers will have, and gives insight into what the global regtech industry will look like by 2020.

Here are some of the key takeaways:

  • Regulatory compliance is still a significant issue faced by global FIs. In 2018 alone, EU regulations MiFID II and PSD2 have come into effect, bringing with them huge handbooks and gigantic reporting requirements. 
  • Regtech startups boast solutions that can ease FIs' compliance burden — but they are struggling to scale. 
  • Some changes expected to drive greater adoption of these solutions in the next 12 to 18 months are: the ongoing evolution of startups' business models, increasing numbers of partnerships, regulators' promotion of regtech, changing attitudes to the segment among FIs, and consultancies helping to facilitate adoption.
  • FIs will actively be using solutions from regtech startups by 2020, and startups will be collaborating in an organized fashion with each other and with FIs. Global regulators will have adopted regtech themselves, while continuing to act as advocates for the industry.

In full, the report:

  • Reviews the major changes expected to hit the regtech segment in the next 12 to 18 months.
  • Examines the drivers behind these changes, and how the proliferation of regtech will improve compliance for FIs.
  • Provides our view on what the future of the regtech industry looks like through 2020. Get The Regtech Revisited Report

     

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Large asset managers are thinking about farming off some of their trading desks, and it could be a gold mine for custodian banks and prime brokers

Tue, 02/19/2019 - 5:30pm  |  Clusterstock

  • Large asset managers are increasingly following in their smaller peers' footsteps, looking to outsource trading operations to cut costs. 
  • New research from consultancy Opimas estimates 20% of managers with over $50 billion will outsource at least some of their operations by 2022. 
  • The trend is driving revenue growth 20-30% annually at outsourced trading desk providers such as CF Global Trading and Tourmaline Partners.

The asset management industry has faced a tough few months, as volatile markets pushed billions of capital out and demand for lower fees continued to eat into revenue. 

Most small funds have long relied on bank custodians and prime brokers to run their trading operations, lacking the internal resources and trading volume to maintain a full team. Now, their larger peers are considering handing off at least some of their trading desks, according to consultancy Opimas. Foreign equities with traders operating in different time zones are the best candidates for outsourcing, as fees and flows continue to pressure the industry. 

See more: MORGAN STANLEY: Big asset managers are facing 'intensifying headwinds' with fees under pressure and market volatility on the upswing

By 2022, 20% of asset managers with more than $50 billion under management will use a third party for some or all of their trading, Opimas chief executive officer Octavio Marenzi predicts. Less than 5% of large managers currently use an outsourcing model, he told Business Insider.

"This is a global trend that will continue to pick up momentum," he said, pointing to managers in Japan, France, and Switzerland, among other countries, that are thinking about using third parties or have already done so. 

As this trend takes shape, it could mean revenue growth of as much as 30% annually for companies like CF Global and Tourmaline Partners that provide outsourced trading desk operations, the report says. 

Marenzi estimates the cost to employ an internal trader and pay for proper tech systems can top $500,000 annually. That trader can handle about $1.5 billion worth of annual equities trading, so for strategies with smaller volume, it may make more sense for another company to handle these trades. 

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The external trading groups are often part of investment banks, prime brokers, asset managers, and custodian banks, which typically charge a fee of five basis points per trade. However, the report said some managers are pushing for a subscription model, with fees independent of trading volume, or for caps on commissions after a certain level of trades. 

"Larger funds can benefit from outsourcing trading for regions or asset classes where they trade on a limited basis, or where they need additional backup for overflow trading when their internal traders are overwhelmed with spikes in trading volumes," Marenzi wrote. 

The research cited one example of a sizable firm that turned to a hybrid trading execution strategy. London-based Hermes Investment Management, which manages about $44 billion, started working with CF Global in 2012 for equities from emerging markets and non-Japan Asia, while retaining its own traders for other strategies.

Marenzi has also spoken with a number of large Japanese managers that are considering other companies for their US equities trading. 

"The main consideration here is the operational expense of maintaining full-time traders for asset classes where the asset manager does not have sufficient scale," Marenzi wrote. 

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How tech giants are using their reach and digital prowess to take on traditional banks (GOOG, GOOGL, AAPL, FB, MSFT, AMZN)

Tue, 02/19/2019 - 5:03pm  |  Clusterstock

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

As headlines like "Amazon Is Secretly Becoming a Bank" and "Google Wants to Be a Bank Now" increasingly crop up in the news, tech giants are coming into the spotlight as the next potential payments disruptors.

And with these firms' broad reach and hefty resources, the possibility that they'll descend on financial services is a hard narrative to shy away from. To mitigate potential losses under this scenario, traditional players will have to grasp not only the level of the threat, but also which segments of the financial industry are most at risk of disruption.

Google, Apple, Facebook, Amazon, and Microsoft, collectively known as GAFAM, are already active investors in the payments industry, and they're slowly encroaching on legacy providers' core offerings. Each of these five companies has introduced features and offerings that have the potential to disrupt specific parts of the banking system. And we expect a plethora of additional offerings to hit the market as these companies look to build out their ecosystems.

However, it remains unlikely that any of these firms will become full-blown banks or entirely upend incumbents, due to regulatory barriers and the entrenched positions of big banks. Moreover, consumers still trust traditional firms first and foremost with their financial data. That means these companies are far more likely to rattle the cages of incumbents than they are to cause their total demise. That said, these companies have a proven capacity to revolutionize industries, making their entry into payments critical to watch for legacy players, especially as their moves demonstrate an intent to be a disruptive force in the industry.

In this report, Business Insider Intelligence analyzes the current impact GAFAM is having on the financial services industry, and the strengths and weaknesses of each firm's position in payments. We also discuss the barriers these companies face as they push deeper into financial services, as well as which aspects of a bank’s core business provide the biggest opportunities for the new players. Lastly, we assess these companies' future potential in payments and the broader financial services industry, and examine ways incumbents can manage the threat.

Here are some of the key takeaways: 

  • GAFAM has been actively encroaching on the payments space. This includes offering mobile wallets for in-store and online payments, peer-to-peer money transfer services, and even loans for small- and medium-sized businesses. 
  • These firms' broad reach and hefty resources have put them in a strong position to take on legacy players. GAFAM has products that have been adopted by millions of users, and in some cases, billions. They also have access to a tremendous amount of capital — Apple, Microsoft, and Google had over $400 billion combined in cash at the end of 2016.
  • However, these firms have to overcome major barriers to compete against legacy players, which includes regulation and trust. For example, 60% of respondents to a Business Insider Intelligence survey stated that they trust their bank most to provide them financial services.
  •  As a result of these barriers, it's more likely that GAFAM will make a dent in very specific segments of the financial services industry rather than completely disrupt it. 

In full, the report:

  • Explains what GAFAM's done to place themselves in a position to be the next potential payments disruptors.
  • Breaks down the strengths and weaknesses of each company as it relates to their ability to build out an extensive financial ecosystem. 
  • Looks at the potential barriers that could limit GAFAM's ability to capture a significant share of the payments industry from traditional players. 
  • Identifies what strategies legacy players will have to deploy to mitigate the threat by these tech giants.
Get The Tech Companies in Payments Report

 

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A controversial startup that was charging $8,000 to fill your veins with young blood says it's halted operations after a warning from regulators

Tue, 02/19/2019 - 4:37pm  |  Clusterstock

  • Controversial blood-transfusion startup Ambrosia had allegedly been charging $8,000 to fill your veins with the blood of young people, despite little to no hard evidence that the procedure had any benefits.
  • On the heels of a warning from federal regulators on Tuesday, Ambrosia allegedly stopped giving the treatments, its website said.
  • Last month, Business Insider reported exclusively that the startup claimed to be up and running in 5 cities.
  • As Business Insider previously reported, several researchers — including those whose original science inspired the procedure — have warned that such a procedure is dangerous.

On the heels of a warning from federal regulators, a controversial startup that had been charging $8,000 to fill your veins with young blood has allegedly stopped providing the procedure.

On Tuesday, regulators with the Food and Drug Administration warned people against getting transfusions of young blood that purport to provide anti-aging and other health benefits.

"There is no proven clinical benefit of infusion of plasma from young donors to cure, mitigate, treat, or prevent these conditions, and there are risks associated with the use of any plasma product," the FDA commissioner, Scott Gottlieb, and the director of the FDA's Center for Biologics Evaluation and Research, Peter Marks, said in a joint statement.

The statement didn't call out any companies by name.

One of the only companies known to offer the procedure, however, is called Ambrosia. Its founder, Jesse Karmazin, previously told Business Insider that he was charging $8,000 for 1 liter of young blood or $12,000 for 2 liters. He also said the transfusions were safe and reliable, despite little to no hard scientific evidence demonstrating either its safety or its benefits. Karmazin didn't immediately return a message seeking comment on the recent FDA statement.

But as of Tuesday afternoon, Ambrosia's website had been changed to read, "In compliance with the FDA announcement issued February 19, 2019, we have ceased patient treatments."

A single employee and a clinical trial with no published results 

Roughly three years ago, Karmazin launched Ambrosia and claimed that infusing older patients with younger blood could help conquer aging by rejuvenating the body's organs.

Read more: A controversial startup that charges $8,000 to fill patients' veins with young blood is opening a clinic in NYC — but researchers whose work inspired it warn that it's dangerous

Karmazin told Business Insider last month that the startup was up and running in five US cities. Ambrosia recently revamped its website with a list of clinic locations and said it was accepting payments for the procedure via PayPal.

In the fall, Karmazin — who is not a licensed medical practitioner but graduated from Stanford Medical School — told Business Insider he planned to open the first Ambrosia clinic in New York City by the end of the year. That didn't happen. Instead, he later said, the sites where customers can get the procedure include Los Angeles; San Francisco; Tampa, Florida; Omaha, Nebraska; and Houston, Texas.

In 2017, Ambrosia enrolled people in a clinical trial designed to find out what happens when the veins of adults are filled with blood from younger people. While the results of that study have not been made public, Karmazin told Business Insider in September that they were "really positive."

There's no scientific evidence to suggest that the treatments could help anyone, however. Several experts who have spoken with Business Insider about the process have raised red flags.

But because the FDA has approved blood transfusions for emergencies like car crashes and other life-saving procedures, Ambrosia's approach was able to continue as an off-label treatment.

There appears to be significant interest in the idea of an anti-aging therapy based on blood.

A week after putting up its first website in September, the company received roughly 100 inquiries about how to get the treatment, David Cavalier, Ambrosia's chief operating officer at the time, told Business Insider in the fall. That led to the creation of a waiting list, Cavalier said.

In January, Cavalier told Business Insider he'd left Ambrosia, leaving Karmazin as the company's only public employee.

Before departing from Ambrosia, Cavalier worked with Karmazin to scout several potential clinic locations in New York and organize talks with potential investors, he said. As of September, the company had infused close to 150 people, ranging in age from 35 to 92, with the blood of younger donors, Cavalier said.

Of those 140 people, 81 were listed as participating in its clinical trial on the government website ClinicalTrials.gov.

The two-day experiment involved giving patients 1.5 liters of plasma from a donor between the ages of 16 and 25. It was conducted with David Wright, a physician who owns a private intravenous-therapy center in Monterey, California. Before and after the infusions, participants' blood was tested for a handful of biomarkers, or measurable biological substances and processes thought to provide a snapshot of health and disease.

Trial participants paid $8,000, the same price as one of the procedures listed on Ambrosia's website.

"The trial was an investigational study," Cavalier said in September. "We saw some interesting things, and we do plan to publish that data. And we want to begin to open clinics where the treatment will be made available."

Young blood and anti-aging: Are there any benefits?

Karmazin is right about the capacity of blood transfusions to save lives. But the science on whether infusions of young blood plasma could help fight aging remains murky at best.

In early experiments in mice, Tony Wyss-Coray, a director of the Alzheimer's research center at Stanford University Medical School who founded a longevity startup focused on blood plasma called Alkahest, found that swapping old blood plasma for young blood plasma appeared to provide some limited cognitive benefits. The 150-year-old surgical technique he used, parabiosis — whose name comes from the Greek words "para," or "beside," and "bio," or "life" — involves exchanging the blood of two living organisms.

But Alkahest's work is very different from Ambrosia's. Their researchers aim to develop drugs for age-related diseases that are inspired by their work with plasma; they are not looking to open a clinic.

Read more: The CEO of a startup aimed at harnessing the benefits of young blood shares his real plan to beat aging

'The results looked really awesome'

Karmazin told Business Insider in 2017 that he got the idea for his company as a medical student at Stanford and an intern at the National Institute on Aging, where he watched dozens of traditional blood transfusions performed safely.

"Some patients got young blood, and others got older blood, and I was able to do some statistics on it, and the results looked really awesome," Karmazin told Business Insider in 2017. "And I thought this is the kind of therapy that I'd want to be available to me."

So far, no one knows whether young blood transfusions can be reliably linked to lasting benefits, however.

Karmazin said that "many" of the roughly 150 people who had received the treatment described benefits including renewed focus, better memory and sleep, and improved appearance and muscle tone.

Yet it's impossible to quantify these benefits as the study's findings have not been made public.

And on Tuesday, regulators urged caution.

"We strongly discourage consumers from pursing this therapy outside of clinical trials under appropriate institutional review board and regulatory oversight," Gottlieb and Marks wrote in their letter on Tuesday.

SEE ALSO: A controversial startup that charges $8,000 to fill your veins with young blood now claims to be up and running in 5 cities across the US

DON'T MISS: Ambrosia says it's opening a clinic in NYC — but researchers whose work inspired it warn it's dangerous

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NOW WATCH: Sea cucumbers are so valuable that people are risking their lives diving for them

Karl Lagerfeld owned around 1,000 of the high-collared, white shirts that defined his iconic look — here's how you can make your own work uniform

Tue, 02/19/2019 - 4:08pm  |  Clusterstock

  • Fashion icon Karl Lagerfeld died on February 19 at the age of 85.
  • Lagerfeld — best known for being the creative director of Chanel — had an iconic work uniform that included a starched white shirt, black sunglasses, and a tailored black jacket.
  • Other successful people — such as Steve Jobs and Mark Zuckerberg — have also been known to sport identifiable work uniforms.
  • To assemble a work uniform of your own, an expert says you'll likely need to buy at least three pairs of pants and at least five tops.

Dressing for success is always a good idea.

Nowadays, that could mean wearing the same outfit to the office every day — a sort of work uniform.

It's a concept that's been adopted by plenty of successful people. Mark Zuckerberg, Barack Obama, and Steve Jobs have all put work uniforms to use.

The late Karl Lagerfeld, who died on February 19 and is best known for being the creative director of Chanel, also sported an iconic work uniform throughout much of his career. That included black sunglasses and a tailored black jacket, in addition, of course, to the high-collared, highly starched white shirt — of which, it turns out, he had about 1,000.

Read more: Having a daily work or travel 'uniform' can improve focus and decrease clutter — these are the 5 companies aiming to help you do just that

As the New York Times reports, assembling a standard "work uniform" allows you to streamline your routine and eliminates one more potentially stressful choice from your daily life.

Experts say that making lots of small decisions like what to wear and what to eat throughout the day saps your mental energy for when you need to make more pressing decisions, a phenomenon called "decision fatigue." This mental fatigue makes people more likely act impulsively or do nothing at all when more important matters come up.

Penny Geers, stylist and owner of Your Closet, Your Style, has some tips on assembling a work uniform of your own.

Check out your closet before you go on a shopping spree

"Take note of your favorite go-to pieces," she tells Business Insider. "Those will be the basis for what you need to purchase to make the full uniform."

Most likely, you'll need to buy at least three to five bottoms and no less than five tops.

Be prepared to splurge

"When purchasing, you need to think quality first," Geers says. "If you typically wear t-shirts of a less-expensive, lower quality, you will need to invest in some that will withstand constant wear and laundering. Also, this collection is your work uniform only and should only be worn for that purpose."

Breathable, easy-to-care-for materials like wool and cotton blends are also a must, as are wrinkle-resistant tops. Geers says to avoid incorporating hyper-trendy items into the ensemble. Those are perishable, as far as style goes, and you can always get your trendy fix by investing in accessories.

Don't limit yourself

"Just because it's a work uniform doesn't mean it has to be boring or dull," she says. "Add your own style through the accessories and the color of the items you choose. Shoes, belts, scarves, jewelry all play a major part in you creating and proudly showing your style and who you are."

Consider your uniform's influence

If you decide to go the route of adopting a work uniform, just remember that clothes are important. What you wear can alter how you think and feel. A California State University study found that formal-wear may make men feel more powerful, The Atlantic reports. What's more, your choice of garments can also affect how others see you. As "Flex: Do Something Different" author and University of Hertfordshire professor Ben C. Fletcher wrote in Psychology Today, "Our clothes say a great deal about who we are and can signal a great deal of socially important things to others, even if the impression is actually unfounded."

Most of all, make sure that your work uniform reflects your style and makes you feel comfortable.

"The trend towards a work uniform makes sense to me," Geers tells Business Insider. "I believe that what you wear strongly affects how you project yourself whether in the workplace or socially. If you feel great in what you're wearing that immediately comes through in how you carry yourself."

SEE ALSO: 22 business-etiquette rules every professional should know

NOW READ: Having a daily work or travel 'uniform' can improve focus and decrease clutter — these are the 5 companies aiming to help you do just that

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NOW WATCH: Fashionable bulletproof clothing is now a thing - but it isn't cheap

Trump's trade war is prompting farmers to put off big ticket purchases, and it's another sign of the pain the tariffs are causing (DE)

Tue, 02/19/2019 - 4:00pm  |  Clusterstock

  • American farmers are tangibly deferring equipment purchases as a result of the ongoing trade war between the US and China, Deere & Co says.
  • The agriculture machinery manufacturer said its quarterly results were hurt by customer concerns over tariffs and trade policies. 
  • Whether Trump can reach an eventual trade deal with China will decide the performance of Deere shares and the whole industry in 2019, Morgan Stanley says.
  • Watch Deere & Co trade live. 

As the prolonged trade war between the US and China continues, American farmers are tangibly deferring equipment purchases, according to agriculture machinery manufacturer Deere & Co. 

Trade frictions "have weighed on market sentiment and caused farmers to become more cautious about making major purchases, " Deere CEO Samuel Allen said Friday in his company's first-quarter earnings release, adding that its results were hurt by customer concerns over tariffs and trade policies. 

It has been nearly a year since President Donald Trump announced plans to charge a 25% tariff on $50 billion worth of Chinese goods, kicking off a trade war between the world's two largest economies. So far, the US has imposed duties on $250 billion of Chinese imports, prompting China to retaliate. 

Tit-for-tat tariffs between the US and China caused pain for many industries, from tech giants who saw their revenue plunge to American soybeans which shed more than a fifth of their value. And now the whole world is watching the next round of trade negotiations between Washington and Beijing, which kick off  Tuesday. If the two sides fail to reach an agreement, the 10% tariff increase imposed on $200 billion of Chinese goods will rise to 25% on March 2.

Whether Trump can reach a trade deal with China will decide the performance of Deere shares and the whole industry in 2019. 

"We see an eventual trade resolution as a tangible catalyst for the shares," said Morgan Stanley analyst Courtney Takavonis in a note out Tuesday. "Investors are unlikely to step in in the absence of further evidence of trade resolution or a notable improvement in farm sentiment." 

Takavonis has an "overweight" rating and $192 price target — 18% above where Deere shares were trading on Tuesday. 

Deere was up 5.8% this year.

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NOW WATCH: Roger Stone explains what Trump has in common with Richard Nixon

Carl Icahn just disclosed a huge stake in Caesars and is calling for the company to sell itself (CZR)

Tue, 02/19/2019 - 3:16pm  |  Clusterstock

  • Legendary investor Carl Icahn disclosed in a Tuesday filing that he had a 9.8% stake in the gaming giant Caesars.
  • Icahn urged the company to sell itself, and said that he plans to talk to the board and other stakeholders about his view, the filing shows.
  • Icahn has a history of mergers and acquisitions in the casino industry.
  • Watch Caesars trade live.

The gaming giant Caesars was up 5.36% to $9.64 a share Tuesday after legendary investor Carl Icahn disclosed a massive stake in the company and urged the company to sell itself.

The billionaire investor has amassed a 9.8% stake in the casino operator, according to a regulatory filing Tuesday. Icahn said he believes that a sale of Caesars is the best path to serve all shareholders' value, and that he plans to talk to the board and other stakeholders about his views, the filing shows.

"We believe that our brand of activism is well-suited to the situation at Caesars, which requires new thought, new leadership and new strategies and have acquired a substantial investment in the Issuer in the belief that it will provide us with significant influence in the company’s future," Icahn said in the filing.

Icahn has a history of mergers and acquisitions in the casino industry. In 2018, he agreed to sell Tropicana Entertainment, a company he bought out of bankruptcy in 2008, to Eldorado Resorts and the real-estate company Gaming and Leisure Properties for $1.85 billion.

And in 2017, Icahn sold the shuttered Trump Taj Mahal casino in Atlantic City to Hard Rock International. He acquired that property out of bankruptcy two years earlier.

Caesars was down 27% in the past 12 months.

Now read:

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NOW WATCH: Meet the three women who married Donald Trump

Google's new cloud boss just made his first acquisition (GOOGL)

Tue, 02/19/2019 - 2:43pm  |  Clusterstock

  • Google Cloud announced Tuesday that it would acquire the Israeli startup Alooma, an "enterprise data pipeline" platform.
  • With Alooma, Google Cloud plans to help customers migrate data to its cloud and to expand its footprint in Israel.
  • Google Cloud's new CEO, Thomas Kurian, has said he wants to attract more enterprise customers.

On Tuesday, Google Cloud announced that it would acquire the Israeli startup Alooma, its first publicly announced acquisition since Thomas Kurian took the reins as CEO.

Alooma, founded in 2013 and now based in Redwood City, California, is an "enterprise data pipeline" platform, meaning it helps customers migrate data to the cloud. The financial terms of the deal were not disclosed.

Kurian, an Oracle veteran, replaced Diane Greene as the head of Google's cloud business at the start of the year. There has been growing speculation within the industry that Kurian will look for big-ticket acquisitions to help Google catch up to Amazon Web Services and Microsoft in the lucrative cloud business.

Last Tuesday, Kurian said Google Cloud planned to expand its sales team and refocus on vertical industries to go after more enterprise customers. With Alooma, Google Cloud hopes to attract those customers and move them onto its cloud, giving them access to its database, analytics, security, and artificial-intelligence services.

"One of the things we're most excited about with Alooma is the deep expertise for both enterprise and open source databases that their team brings to Google Cloud, which will be critical in helping us build out additional migration capabilities within Google Cloud Platform," Amit Ganesh, the vice president of engineering at Google, and Dominic Preuss, the director of product management at Google Cloud Platform, said in a statement.

Read more: The new CEO of Google Cloud explains the updated master plan for taking on Amazon Web Services

Google Cloud is also expanding its footprint in Israel. In May, it announced it would acquire Velostrata, an Israeli cloud-migration startup.

Alooma was already a Google Cloud partner, with integrations for Google Ads, Google Analytics, Cloud Spanner, and BigQuery.

"From the very beginning we've been humbled to serve thousands of customers and partners, and grateful for the trust they've placed in us," Alooma's cofounders, CEO Yoni Broyde and Chief Technology Officer Yair Weinberger, said in a statement. "We believe that as part of Google Cloud — bringing together the best-in-class data migration and integration services — we can make our customers and partners even more data driven and successful."

SEE ALSO: Insiders say Google's new cloud boss is likely to make some very large acquisitions

Join the conversation about this story »

NOW WATCH: Roger Stone explains what Trump has in common with Richard Nixon

I've been filing my taxes with TaxAct for years, and it makes filing taxes just about bearable

Tue, 02/19/2019 - 2:38pm  |  Clusterstock

  • I've been using tax filing software TaxAct for a few years now to file my taxes online, and I've found it to be straightforward and easy.
  • TaxAct is especially useful for people who have slightly more complicated tax situations — I use it to file both my freelance income and my wife's W-2 income.
  • Tax Day 2019 is April 15th.

For the past several years, I've used TaxAct to file my family's taxes as I bounced between full-time freelance, being a partner in a business, and handling my wife's W-2 income. 

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

In the past, I've used the free version of other software — as well as an accountant when I had business filings — but when I needed more than the free software could give for my personal taxes, I was attracted to TaxAct a few years ago with the promise of a slightly cheaper price and better tools for self-employed users. Being a freelancer for most my of life has put me in the habit of doing my own taxes.

Below, I've walked through the free version of TaxAct, including some of my favorite features. Now that I pay for a higher tier, I can tell you that the free version (which also offers free state filing) and the paid versions are similar, although the paid versions have a few more questions based on those with more complicated needs.

Read More: I'm filing my taxes with TurboTax and will probably get one of my smallest refunds ever, and I'm happy about it

Here's what it's like to file your taxes using TaxAct:

SEE ALSO: After getting in trouble with the IRS, I've figured out the best way to do my taxes for working multiple jobs

To get started, go to TaxAct.com and select the best version for your situation. You can just start with the free version, or use its guides to help figure out the best fit for your needs.

If you're a returning user, you can import most of your basic information from last year's return with a click, which gives TaxAct a baseline to compare your returns and saves considerable time.

One neat thing about TaxAct is the running tally you get in the right-hand corner as you add deductions and credits. It slightly “gamifies” the drudgery of filling out taxes. If you like shiny things, as I do, this is a benefit.



Even if you haven't used TaxAct, you can still save time by importing a PDF of your previous year's return.

See the rest of the story at Business Insider

JPMorgan is building a cloud engineering hub in Seattle minutes away from Amazon and Microsoft, and it's planning to hire 50 staffers this year

Tue, 02/19/2019 - 2:32pm  |  Clusterstock

  • JPMorgan is staffing a Seattle engineering hub for cloud security developers thought to be the first of its kind among the largest US banks.
  • The company hired 50 people last year and has plans to hire another 50 this year.
  • The bank made the decision to locate the hub in Seattle because of the preponderance of cloud providers and the depth of talent in that market.

The cloud simply became too important for JPMorgan to ignore. 

As the bank began to embrace cloud computing and the idea of housing information at dozens of disparate data centers rather than a few it tightly controlled, execs at the largest US bank knew it would face a growing demand for engineers who knew how to keep its data safe. The challenge? How to attract that talent.

Many of the best engineers in cloud security work for the largest cloud providers — Amazon Web Services, Microsoft's Azure and Google Cloud — in Seattle, where there's a thriving tech scene and a more laid back vibe than in New York. Recruiting those engineers and asking them to move to other locations on the buttoned-up East Coast might have been a tough sell. 

So the bank decided to do the next best thing and go to them. Last year, the company began hiring engineers for a new cloud cybersecurity office in Seattle, housed with other JPMorgan employees at an office just blocks from such landmarks as Pike Place Market. Recruiting engineers in their home market made the ramp up easier, said Todd Hrycenko, head of cloud, platform and application security at JPMorgan. 

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"All of the large cloud providers have made Seattle their home base in North America," he said in an interview. "In fact, the density of this sort of talent doesn’t exist outside of a couple other cloud pockets around the world," he said, naming Dublin and Hyderabad as the others. 

In choosing Seattle, JPMorgan placed its office within minutes of the world's three largest cloud providers — the bank has existing partnerships with Amazon and Microsoft — and gave itself a clear advantage in working with those companies and hiring their employees, said Hrycenko, who joined from Salesforce last year to be the office's first employee. 

Hrycenko said the proximity helps when scheduling meetings with tech executives, especially around specific projects or partnerships that they're working on together.

Cloud computing refers to the practice of accessing shared applications, processing power or storage on a network of remote servers, as opposed to downloading them onto a computer or using a single data center. The technology is widely considered necessary for the type of techniques that banks are now looking to use such as analyzing large data sets or teaching computers to parse human language. 

Read more: Employers are searching high and low for people with Google Cloud skills, says new report

Hrycenko joined JPMorgan in the middle of last year and quickly hired another 50 or so cloud security experts through year-end 2018. He's got plans to hire another 50 this year, with larger ambitions of adding even more. JPMorgan's broader technology division is now studying the idea of hiring more general cloud developers in Seattle, he said. 

Not surprisingly, many of the new hires have come from the three largest providers. That's deliberate: in hiring, more so in cloud than other technology efforts like programming, it's critical to get employees who have worked at companies with big cloud offerings, according to Hrycenko. 

"The important part is the ability to understand the scale that cloud providers operate at," he said, adding that while banks might be used to having data centers in a few locations, the number could grow to 40 or more when you start using cloud technologies. "It’s hard to acquire that skill set independently."

JPMorgan created its own private cloud in 2016, according to the Wall Street Journal. It finally moved some applications into the public cloud in May 2017 after about two years of study, the newspaper said.

That makes it ones of the industry's pioneers, with many in banking still wary of moving data and key applications into the cloud due to cybersecurity, operational and regulatory fears. But companies and regulators are becoming increasingly comfortable that the security issues can be managed. 

In October, JPMorgan hired 23-year Microsoft veteran and principal cybersecurity architect for Azure, Mark Novak. This month, the Puget Sound Business Journal named Novak one of its Innovators of the Year. At JPMorgan, he's working on a strategy to stitch together public cloud providers and JPMorgan's private cloud into what's known as a hybrid cloud, according to his Linkedin profile. 

Hassan Sultan joined JPMorgan this month as an executive director after five years at Amazon Web Services, while CJ Keefe joined as an executive director last year after two years at AWS, according to their LinkedIn profiles. Both work in cybersecurity. 

On Friday, JPMorgan continued its recruitment effort. It posted a job ad for a "Site Reliability Engineer — Cloud" on its careers website. The location? Seattle. 

Join the conversation about this story »

The CEO of the 'Costco for millennials' asks every potential hire 3 questions to weed out the jerks

Tue, 02/19/2019 - 2:24pm  |  Clusterstock

  • Boxed CEO and cofounder Chieh Huang interviews every job candidate personally, and says he asks them three questions to make sure they're not jerks.
  • The questions are meant to test whether a job candidate is curious, open, and can hold a conversation, and to find out how arrogant they are, Huang told the TED blog.
  • Huang said the interview is important because people often end up spending more time with their coworkers than their families and friends.

Before you can work at Boxed, the online retailer that raised $111 million last year, you'll have to pass CEO Chieh Huang's test.

Huang said he personally interviews every potential hire for the company, making him the "last line of defense" for the company. 

But when Huang interviews people, he isn't looking to hear about their qualifications or their professional accomplishments — he's simply trying to screen out jerks.

"The last thing you need is someone with a huge ego and that's super smart but that's just a complete a--hole," Huang said at last year's Iconic conference, hosted by CNBC and Inc. "I still heavily screen for that."

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Huang told Amanda Miller at the TED blog that during his 15- to 30-minute interviews with potential hires, he asks three questions to determine if they'd be good fits:

His first question is "Tell me about yourself, but you can't mention anything that's on your resume." It can be surprisingly hard for job candidates to pull this off, Huang said, but he said he's really just trying to gauge whether they can hold a conversation and, ultimately, their curiosity and openness.

For example, if the person begins talking about experiences with travel or food, Huang will ask follow-ups such as "What's the best or worst trip you’ve ever taken?" or "What's the best or worst food you’ve ever eaten?"

Next, Huang asks candidates "a 'thought-provoking' query to test how candidates think on the spot," the TED blog reported. Huang said he changes up the actual questions in this round, but he likes to choose ones that have no correct answer, such as "Which country will be the first to make it illegal for humans to drive cars? And what year do you think it will happen?"

With this question, it doesn't matter so much what a candidate's answer is, but how they come up with it. Huang said he wants candidates to really think about the answer and not simply blurt out the first thing they think of. Do they really consider the premise of the question and "go one level deeper" about its implications, or do they freeze up and say "I don't know"?

Read more: Boxed, the 'Costco for millennials,' just got supercharged by the Walmart of Japan

Lastly, Huang tells candidates to "rate your knowledge of technology trends on a scale of 1 to 10." This question screens out people who may think a little too highly of themselves — Huang said anyone who rates themselves a 9 or 10 get "an instant red flag."

The way Huang sees it, the tech industry is changing way too rapidly for anyone to really consider themselves an expert, and "folks who feel like they know everything are generally condescending to the people around them."

Huang said his three-question test is worth the trouble for himself and his fellow Boxed employees.

"The reality is we spend more time, more waking hours with our coworkers than we do with friends and family. If you have a full-time job, that's the reality," Huang said at the Iconic conference. "And selfishly, I just don't want to spend it with folks I don't like."

Read the full interview at TED »

SEE ALSO: The group that makes the SAT pinpointed the 2 most important skills for students to learn for future success

DON'T MISS: A CEO who's faced hundreds of rejections over her 20-year career waits 24 hours to send an email that more often than not helps turn 'no' into 'yes'

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NOW WATCH: We tried to buy people's lottery tickets for more than they paid — it shows why we overvalue something simply because we own it



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