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How banks and financial institutions are implementing blockchain technology

Business Insider, 1/1/0001 12:00 AM PST

Major Blockchain Consortia

How Blockchain Technology Spawned Virtual Currencies

Blockchain technology, less commonly known as distributed ledger technology (DLT), is the underlying foundation that can create shared digital databases of entries that are unchangeable.

Initially, the tech's developers conceived it as a way to centralize record-keeping (particularly of financial transactions) without the need for authorization by an third party. Instead, multiple users with access to the data confirm the records.

Blockchain started to gather mainstream attention in 2009 when it became the underlying technology that powers the cryptocurrency Bitcoin. 

Banks and Finance Industry Take Notice

Blockchain technology proponents believe it can be used to create secure and convenient alternatives to time-consuming and expensive banking processes. And this theory seems to be gaining traction, as almost every major bank around the world is testing it.

For example, banks are trying to create systems that decrease the number of participants involved in transactions. But some have invested more heavily than others. Some are investing in blockchain startups. Others are partnering with fintech companies that use blockchain (in fact, nearly all blockchain-based proofs of concept (POCs) developed by banks have been undertaken in conjunction with fintech partners.)

And finally, multiple global banks — including UBS, Goldman Sachs, and Morgan Stanley — have published research on blockchain technology through in-house efforts; however, this research is mostly limited to explaining technical details and exploring theoretical use cases. Few banks to this point have constructed their own blockchain-based systems or in-house technology without the aid of banking or fintech partners. But a handful of large global banks with the necessary resources to research and build large-scale projects have started to patent their own blockchain-based systems or their underlying tech.

Major Banks Blockchain Initiatives

Advantages to Blockchain Technology in Banking

Banks are exploring blockchain technology for several reasons, primarily cost savings and efficiency. But let's dig into blockchain in finance a bit more to examine the major factors behind this push.

  • Cost savings and efficiency: Blockchain's strengths are highly attractive to banks, which are dealing with rising costs for maintaining or replacing their aging infrastructure and ensuring compliance with heavy regulatory burdens. Furthermore, banks must deal with increasing economic instability. To that end, blockchain-based solutions could generate cost savings of up to $20 billion per year, according to Santander
  • Competing with startups: Fintechs are using blockchain tech to offer services (such as remittances and international payments) at reduced costs, with greater speed, and with more user-friendly interfaces than major banks. As a result, banks have started to construct their own blockchain-based solutions to better compete with these up-and-comers. 
  • New business models: Banks can use blockchain-based systems to circumvent central bodies or legacy infrastructure (keep in mind this was the original blockchain use case). Banks could potentially develop these systems to create brand new business models that disrupt the financial ecosystem.

Future of Blockchain in Banking and Finance

The most obvious application of blockchain in finance in the future is through cryptocurrencies, specifically Bitcoin.

Since its creation, Bitcoin has seen its fair share of ups and downs, surges and crashes. But consider its boom in 2017 — and a forecast by Snapchat's first investor, Jeremy Liew, that it would hit $500,000 by 2030 — and it's understandable why Bitcoin could be so attractive to investors and financial institutions.

But to reach new heights on the back of blockchain tech, banks will need to keep the following three factors in mind:

  • Narrowed focus: Several banks have begun to focus their blockchain efforts on projects that will be materially beneficial to their businesses. This is likely to be a more effective strategy than a broader, catch-all approach.
  • Fewer participants per project: As a result of the narrowed focus, companies should streamline their approaches to their blockchain projects in order to generate quicker results.
  • Cooperation with regulators: The blockchain-based solutions that banks develop might be similar to current solutions with regard to regulatory compliance. But financial organizations will need to make sure that lawmakers understand how these new solutions work in order to gain their approval.

More to Learn

The technological potential of blockchain is immense, and its uses will only grow with time. That's why BI Intelligence has put together two detailed reports on the blockchain: The Blockchain in the IoT Report and The Blockchain in Banking Report.

To get the full report, subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

You can also purchase and download the full reports from our research store: 

                            >> Blockchain in the IoT

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Coinbase digs into $100 million funding round to add customer support phone line for angry cryptocurrency traders

Business Insider, 1/1/0001 12:00 AM PST

Brian Armstrong Coinbase

- Coinbase announced a new customer support phone line to help users facing issues with the cryptocurrency platform.

- The company promised to expand customer service operations as early as June, but has faced an onslaught of unhappy customers in recent months as the userbase overpowered the support staff.

-However, a call we placed to the support line never made it through to a human customer support agent. The call ended after 15 minutes and 30 seconds, most of which was spent on hold. 

If you need me, call me.

That's the latest message coming out of Coinbase, the $1.6 billion cryptocurrency trading platform, which addressed months of customer complaints on Wednesday with the opening of a customer support phone line.

The San Francisco-based company will now offer phone support during business hours, though the support agents can only handle issues related to verification and locked accounts. Customers that need specific account help will still have to reach out by email, or consult Ada, the Coinbase support bot. 

While Coinbase said the phone lines were live on Wednesday, a call placed by this reporter at 12:40 pm PST went directly to hold. After being on the line for 15 minutes and 30 seconds, the automated voice said that the lines were backed up, and that the caller should hang up and try again, or submit a complaint online. 

As the price of bitcoin hovers just below $4,000, more and more people are realizing the potential to make considerable sums of money by trading cryptocurrencies. 

It's been a mixed blessing for Coinbase, the leading cryptocurrency trading platform, which confirmed its unicorn status in August with the announcement of a $1.6 billion valuation. As its userbase grew — double what it was in September 2016, by the company's account — so did the number of complaints, ranging from locked accounts to thousands of dollars in unaccounted for funds.

One Coinbase user, Michael Sion, said he saw $16,300 disappear from his bank account without any explanation. He said that Coinbase immediately froze his account when he contacted the company. Despite contacting the company every day, it took over a week to hear back about what went wrong, Sion said. After Sion reached out to the U.S. Consumer Financial Protection Bureau and the California Attorney General’s office to complain, he finally got his account unfrozen by Coinbase.

In the end, it turned out that Sion had made a mistake when indicating where the money was to be pulled from. But he contends that the issue — and his escalating concerns that Coinbase had committed fraud — could have been mitigated if the company had responded to his complaints sooner.

"I hope as a consumer they do a better job and meet the standards of the rest of the financial community," Sion said. 

Among the 89 negative reviews on the Better Business Bureau website, many of them focused on that same point of contention: the user complained via email, but didn't hear back from Coinbase for days or weeks, if at all. In multiple cases, thousands of dollars were on the line, and the users feared that money would be gone forever. 

"Despite multiple attempts to contact their customer support, I have received no response from them beyond an automated email response to my inquiry. I have over $8k that I deposited into the account that I cannot withdraw from my account," Josh D. wrote on August 24.

Coinbase has long been aware that its customer support is an issue. In June, CEO Brian Armstrong wrote that the company had re-evaluated its growth plan in order to improve customer service.

But the issue was again thrust into the national spotlight in August, when the platform faced a mass exodus over its initial decision not to support a new currency called bitcoin cash. Many users faced a 12-hour wait time to withdrawal their investments, as some scrambled to transfer their bitcoins to competitors that would support bitcoin cash.

When the company announced a $100 million in Series D funding in August, the company said once again that expanding its staff was a top priority.

On Twitter, Armstrong posted a chart which indicated that Coinbase would have over 200 customer support staffers by October — up from around 25 in June. Coinbase wouldn't share specific numbers, but confirmed that the chart is an accurate representation of the company's growth, with most of the support staff coming from external agencies in the US and abroad.

In an email to Business Insider, a representative for Coinbase said that at the end of the day, the company just wasn't prepared for the growth it saw over the last six months.

"As a result, our systems have been pushed to the limit and has created a negative experience for some customers," the Coinbase representative said. "We understand how frustrating this can be and we are committed to improving the experience for our customers."

SEE ALSO: Bitcoin exchange Coinbase confirms its unicorn status with $1.6 billion valuation

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Everyone is focused on the wrong area of tech right now (AAPL, GOOGL, MSFT, NVDA)

Business Insider, 1/1/0001 12:00 AM PST

mark zuckerberg hugo barra virtual reality augmented facebook xiaomi

  • The world is focused on augmented reality right now when they should be paying more attention to machine learning.
  • Both are exciting, but machine learning is the tech powering AR and will make our lives simpler and easier.

Everyone is focused on the wrong area of tech right now.

Augmented reality is arguably the hottest trend in the sector, and it's one of the most exciting features of Apple's recently announced iPhone X. Microsoft, Google, and Apple all have their own AR platforms and countless other companies have AR applications for those platforms already. It's exciting stuff.

But, it's all a distraction. In the future, AR will just be the surface level technology that covers the truly exciting technology underneath.

"AR is a very promising interface, as a way for people in interact with computers. Which is fantastic and important," Aaron Shapiro, the CEO of the marketing firm Huge, told Business Insider. "But machine learning is a whole new way for computers to compute."

Shapiro says that machine learning is the truly interesting technology for his firm. Marketers, including Huge, are working on AR applications right now, but ultimately will move to machine learning as well as development becomes easier. Shapiro illustrates this power of machine learning vs AR with a coffee shop example.

Huge Cafe is a real coffee shop in Atlanta that Shapiro's company uses to test marketing ideas on real customers. He says that one day, customers won't be ordering coffee in person. He said machine learning applications are going to realize that you are heading to the coffee shop based on factors like your direction, path and time of day. The applications are then going to place your coffee order, and automatically pay for you when you arrive and pick up your latte from the counter.

Augmented reality application for retail business concept.

"If you think about today you can't imagine having a service that is not mobile first, it'd just be odd," Shapiro said. "Five years from it's going to be just as odd using a service that is not smart and doesn't continually adjust and adapt to how you use it and how it can better serve your needs. That's the power of machine learning."

If you need more evidence of machine learning's importance to the future of tech, just look behind the scenes at the biggest tech firms.

Apple's face recognition technology in the iPhone X was trained using machine learning, and the new processor powering the phone has a dedicated chip built in that makes machine learning applications on the phone faster than previous iterations.

Google has recently refocused the entire company on AI. "In an AI first world, we are rethinking all our products, and applying machine learning and AI to solve user problems," Google's CEO Sundar Pichai said at the company's developer conference earlier this year.

Shapiro said that the best uses of AR in the future aren't standalone apps, but the integration of AR into existing apps that will take advantage of machine learning. He said the best examples of this are furniture store apps that let you place virtual furniture in your home or apps like the one his company is working on with Lowe's which will let you measure complicated objects in your home instantly by pointing your phone's camera at them. Both of these applications use AR as a way to visually display results generated by the complicated machine learning algorithms that are working to process the images and measure and scale objects.

Companies with AR platforms stand to benefit the most from the technology, Shapiro said. Apple and Google both have developer platforms for AR, and large install bases ready to play and test new AR applications. Companies like Nvidia, Google, and AMD could benefit from the machine learning technology boom. Each of those companies makes chips that speed up the training of machine learning systems and could see an increase in demand as more companies start developing their own machine learning systems.

"I love technology that makes things simple and more powerful for people," Shapiro said. "[Machine learning] is another step function ahead for tremendous simplicity and removal of friction in people's day to day lives."

SEE ALSO: Augmented reality will drive the next wave of smartphones — and Apple is destroying its competition

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The Feds are looking into some suspicious Equifax trades (EFX)

Business Insider, 1/1/0001 12:00 AM PST

Equifax trading

Raise your hand if you've heard this before: There may have been some funny business around the Equifax hack.

In the latest development, the House Financial Services Committee is now looking at some Equifax options trading that took place following the initial discovery of the breach, but before it was disclosed to the public, according to a report from CNBC's Liz Moyer.

The activity in question occurred on August 21, when a block trade for 2,500 units of an Equifax put contract was made at 1:36 p.m. ET, according to data compiled by Bloomberg.

The puts represented a wager that the company's stock price would drop to $135 by September 15. Equifax closed at $139.89 the previous trading day, so in order for the trade to be profitable, the stock would've had to drop 3.5%.

That happened on September 8, the first day of trading after the hack became public. The stock dropped 14%, closing at $123.23. Assuming the trader, or traders, who made the bet on August 21 haven't yet closed their position and taken profits, their total gain would amount to more than $10 million.

And if the options market is to be believed, traders think Equifax's stock has further to fall. As of last week, they were paying the highest premium since October 2014 to protect against a 10% decline in shares over the next six months, relative to wagers on a 10% gain. While it's come down from those highs, it's still far above its average over the period.

According to the CNBC report, which cited a source familiar with the investigation, the lawyer for the committee has inquired about how out of the ordinary the size of the trade was, where the options switched hands, and what types of traders would've been active at the time.

The investigation isn't the first foray into suspicious Equifax trading following the hack. On September 18, Bloomberg reported that the US Justice Department was investigating whether top company officials violated insider-trading laws when they sold Equifax shares before the company disclosed the hack.

The report said that Equifax's chief financial officer, John Gamble; president of US information solutions, Joseph Loughran; and president of workforce solutions, Rodolfo Ploder, were those under scrutiny. The three senior executives dumped almost $2 million worth of stock days after the company learned of the breach, Securities and Exchange Commission filings show. An emailed statement from the credit-monitoring agency said the executives "had no knowledge" of the breach beforehand.

As these latest developments show, authorities are still sifting through the wreckage of the hack for signs of wrongdoing. And if the past week has been any indication, there could be more to come.

Screen Shot 2017 09 20 at 2.54.39 PM

SEE ALSO: Equifax is getting crushed — and traders are betting it's going to get so much worse

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Bank stocks are rising after the Fed announces it will unwind its balance sheet (BAC, GS, C, JPM, KEY, WFC, BBT)

Business Insider, 1/1/0001 12:00 AM PST

Janet Yellen

Most of the major bank stocks are rising in the wake of the Federal Reserve's Wednesday announcements.

The Fed announced that it would start unwinding its $4.5 trillion balance sheet in October. It will do this by slowly letting bonds roll off its balance sheet by not reinvesting them as they mature. The central bank will begin the process slowly, and increase its unwind over time.

The Fed also signaled it sees one more rate hike this year and implied three hikes in 2018.

Wednesday's moves show the Fed is serious about exiting the emergency measures that were taken during the financial crisis.

Ahead of the Fed, the KBW Nasdaq Bank Index was trading lower. However, bank stocks are largely higher after the Fed's announcement. Some of the biggest banks and their moves are listed below:

 

SEE ALSO: Fed to unwind financial crisis emergency measures — begin shrinking its $4.5 trillion balance sheet in October

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Bank stocks are rising after the Fed announces it will unwind its balance sheet (BAC, GS, C, JPM, KEY, WFC, BBT)

Business Insider, 1/1/0001 12:00 AM PST

Janet Yellen

Most of the major bank stocks are rising in the wake of the Federal Reserve's Wednesday announcements.

The Fed announced that it would start unwinding its $4.5 trillion balance sheet in October. It will do this by slowly letting bonds roll off its balance sheet by not reinvesting them as they mature. The central bank will begin the process slowly, and increase its unwind over time.

The Fed also signaled it sees one more rate hike this year and implied three hikes in 2018.

Wednesday's moves show the Fed is serious about exiting the emergency measures that were taken during the financial crisis.

Ahead of the Fed, the KBW Nasdaq Bank Index was trading lower. However, bank stocks are largely higher after the Fed's announcement. Some of the biggest banks and their moves are listed below:

 

SEE ALSO: Fed to unwind financial crisis emergency measures — begin shrinking its $4.5 trillion balance sheet in October

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Japan wants to roll back regulations for financial technology startups — here's why it could be bad for the US

Business Insider, 1/1/0001 12:00 AM PST

Screen Shot 2017 09 20 at 12.09.56 PM

NEW YORK — Japan's push to attract innovative financial technology startups to the country could spell trouble for the US.

On Wednesday at the New York Stock Exchange, Japanese Prime Minister Shinzo Abe said the government was moving forward with a plan to roll back regulations on some fintech startups to help spur the development of emerging technology and drive growth in the country.

"When one wants to conduct a world-first trial, such as with new financial services made possible through fintech, it is impossible to predict the sort of regulations with which the trial will come into conflict," Abe said.

As such, Abe is pushing for a regulatory sandbox program that would allow fintechs, startups looking to automate or digitize aspects of financial services, to operate and scale without meeting existing regulations.

"We will make a sandbox in which it is possible for certain participants to conduct trial and error freely on new business for a certain period of time without conforming to existing regulations," Abe said.

Inaki Berenguer, the CEO of CoverWallet, a New York-based fintech company, told Business Insider that the proposed sandbox in Japan would help foster an environment in which entrepreneurs have more leeway to innovate.

While such an environment is understood to exist in Silicon Valley more broadly, Berenguer said, those hoping to break through specifically in the financial industry in the US are often required to subscribe to the same regulations as their much larger peers.

That often means paying lawyers to ensure compliance, costs that can force entrepreneurs to put off investing in their product and team. This creates a sort of Catch-22 for some startups. Venture-capital backers are less likely to give entrepreneurs money without a product, but it's more difficult to create a product with less money when also paying legal costs. Berenguer says this has made financial technology harder to break into relative to the overall tech industry.

"This suppresses innovation," he said.

Singapore, UK sandbox

Some companies, he said, are seeking greener pastures in Singapore and the UK, where a sandbox program has existed for some time.

"With them goes their ideas and the potential jobs and wealth those ideas could bring to fruition," Berenguer said.

"The addition of Japan gives fintech companies another option," Frederic Nze, the founder and CEO of Oakam, a UK-based startup lender, told Business Insider.

Japan's sandbox program could add further pressure to the US fintech industry. According to Mark Brnovich, Arizona's attorney general who has long advocated regulatory overhaul in financial services, US fintech firms received only 33% of fintech venture capital spending, lower than the 56% US share of total VC spending.

"This underperformance may have many causes, but our global competitors are certainly exploiting their regulatory advantage to get ahead in fintech," Brnovich wrote.

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Joint Report by Stellar and Luxembourg Fintech Platform: Approach ICOs with Caution

Bitcoin Magazine, 1/1/0001 12:00 AM PST

Joint Report by Stellar and Luxembourg Fintech Platform: Approach ICOs with Caution

 Stellar, a nonprofit decentralized financial network, and the Luxembourg House of Financial Technology (LHoFT), the country’s dedicated fintech platform, have published a joint report on Initial Coin Offerings (ICOs).

According to the report, organizations have raised over $1.8 billion through ICOs since January 2017. As this popular new fundraising method provides a simple and fast method to acquire serious funding, there has been “tremendous momentum” growing around ICO launches among new businesses in the blockchain industry, the report said.

On the other hand, the report also detailed that there are high risks associated with ICO investments. Since there is still a lack of regulation and control surrounding the industry, Stellar and LHoFT compared the current ICO sphere to the “Wild West” — a term that has become rather popular of late in reference to ICOs.

“ICOs raise issues for consumer protection, combating money laundering, and other regulatory compliance goals. Complications may arise from several sources, including the mechanism through which ICOs are conducted, the teams spearheading ICOs, the identities of contributors to ICOs, the quantity of money that is raised, the validity of ICOs’ technology and processes, marketing claims, and the impact that ICOs have on the greater cryptocurrency markets. All these factors must be scrutinized so that the heralded benefits of ICOs are balanced against market and legal risks as the model matures and gains broader acceptance,” the report states.

LHoFT and Stellar addressed both the upsides and the downsides of ICO fundraising. Organizations launching ICOs benefit from a built-in customer base, a committed group of customers that will stay with the product or service until it officially launches. Furthermore, according to the report, the fundraising method has positive effects on the network, can target global investors (or donors) in a non-discriminatory manner while providing a fast and easy fundraising mechanism. Additionally, retail investors are keen on participating in ICOs, and open-source projects can benefit from the fundraising method too.

Similarly, investors can benefit from the high liquidity of the tokens (sold during ICOs), in addition to being able to sell them through cryptocurrency exchanges or over-the-counter (OTC) transactions, which would allow the investors to transfer the tokens easily without the authorization of the token issuer (the organization launching the ICO).

Token holders are often offered bonuses, such as “gift cards” or “licenses” that will incentivize them to support the growth and the development of the project. ICO investors also benefit from the lack of “geo-lock” — they can invest in the project no matter the location (unless specified otherwise). Most importantly, ICOs have a high potential for big gains.

On the other hand, there are plenty of risks associated with ICOs, according to the report. Firstly, ICOs lack the formal process for auditing the organizations.The writers of the study highlighted a potential problem with smart contracts: If the contract is not programmed correctly, it could lead to unexpected transfers without the authorization of the token owner. Some tokens are not based on any fundamental value, thus, may facilitate bubbles and Ponzi schemes.

Furthermore, Stellar and LHoFT emphasized the issue of “investor education” — some investors are not informed well enough about an ICO project before investing in it. The report also detailed security problems, such as phishing scams and the loss of private keys, which can result in the investors losing their tokens.

As with most cryptocurrencies, tokens also tend to be volatile. According to the report, ICO cashouts may create price distortions on the market. Furthermore, the market can be subjected to manipulation, such as the “Whales” method, in which the token issuer organization holds back a percentage of the tokens and distributes them between the team members. Both investors and organizations can experience network lag during popular ICOs, while some token distribution mechanisms can cause unpredicted difficulties for both parties.

The lack of regulations within the ICO space presents various problems for both the investors and the organizations, such as being subject to the financial regulations of multiple jurisdictions. The anonymous nature of the cryptocurrency sphere can result in many of the investors being seen only as pseudonyms, which could cause issues for law enforcement and regulators. Since there is uncertainty about the taxation of tokens, both investors and organizations could face legal issues, such as tax evasion charges. Furthermore, the report discusses that there is an increasing concern that ICOs can be used by criminals for money laundering or terrorist financing purposes.

The post Joint Report by Stellar and Luxembourg Fintech Platform: Approach ICOs with Caution appeared first on Bitcoin Magazine.

The Fed boosts its outlook for the US economy, cuts inflation expectations

Business Insider, 1/1/0001 12:00 AM PST

The Federal Open Markets Committee voted to keep its benchmark interest rate in a range of 1%-to-1.25% at the conclusion of its two-day meeting, as virtually everyone was expecting.

It also released its latest Summary of Economic Projections.

The Fed now expects real GDP to grow 2.2% to 2.5% in 2017, up from June's projection of 2.1% to 2.2%. Its expectation for the unemployment rate to fall to 4.2% to 4.3% this year is unchanged.

The Fed's inflation expectations, however, continued to slide. It now says core PCE will come in at 1.5% to 1.6% in 2017, down from prior expectations of 1.6% to 1.7%.fed economic projections

SEE ALSO: Warren Buffett says the Dow might climb over 1,000,000 in 100 years

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Fed to unwind financial-crisis emergency measures and begin shrinking its $4.5 trillion balance sheet in October

Business Insider, 1/1/0001 12:00 AM PST

janet yellen

The Federal Reserve on Wednesday said it would embark next month on its biggest postrecession policy shift since it first raised interest rates at the end of 2015.

The central bank confirmed, as expected, that it would start trimming the $4.5 trillion balance sheet it built up after the Great Recession. No member of the Federal Open Market Committee, which decides policy, disagreed with this move.

As it responded to the US economic slowdown and housing crisis a decade ago, the Fed acquired Treasurys and mortgage-backed securities to push down borrowing costs.

But with the economy back on its feet, this emergency measure — the key part of what's known as quantitative easing — is no longer needed. The Fed began tapering its purchases in 2013 and now wants to actively get rid of the bonds it owns.

To do this, it won't reinvest some of its bonds as they mature — and that way, they'll roll off its balance sheet. The amounts to start are $4 billion a month in mortgage securities and $6 billion in Treasurys. It would then raise these every quarter until they hit $20 billion and $30 billion.

This process, alongside interest-rate increases, should put the Fed's policy more in line with an economy that's in an expansion. It could also give the Fed an extra tool to help the economy if it were to enter a recession.

"If the Fed has actually tapered their balance sheet sufficiently, they can use, if needed, quantitative easing of some sort," said Mona Mahajan, the US investment strategist at Allianz Global Investors.

The Fed left its benchmark interest rate unchanged Wednesday, in a range of 1% to 1.25%.

'Going to go slow'

"Only once we start getting a few months of $50 billion not reinvested — and that's probably 12 months out from now — will we start to see the balance sheet contract," Mahajan said.

The Fed wants the balance-sheet reduction to be as uneventful as possible to Americans on and off Wall Street. One reason is that quantitative easing improved investors' appetite for risky financial assets.

"If they begin to let the balance sheet roll off in an aggressive way, that's taking money out of the system, and that would be negative for equities," said Byron Wien, the vice chairman of Blackstone's private-wealth-solutions group.

"I think they're going to go slow, so I'm not too worried about it," he told Business Insider before the Fed's announcement. "But you never know."

The Fed's statement also said that hurricanes Harvey, Irma, and Maria were unlikely to affect the economy "over the medium term."

"Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily," the statement said.

Besides that bump, the Fed expects inflation to remain below its 2% target over the next year at least.

That's one reason it won't raise rates in a hurry. The new dot plot, which shows FOMC members' expectations for rates, signaled one more hike in 2017 and three in 2018. In the longer term, the median member expected rates to settle at around 2.75%, down from 3%.

Here's the full statement:

Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have remained solid in recent months, and the unemployment rate has stayed low. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Jerome H. Powell.

SEE ALSO: The Fed risks repeating a ghastly mistake it made right before the past 2 recessions

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Banks Are 'Afraid' of Bitcoin, Says Wealth Advisor

CoinDesk, 1/1/0001 12:00 AM PST

This wealth advisor believes banks are afraid of bitcoin, according to a new interview.

Warren Buffett says the Dow might climb over 1,000,000 in 100 years

Business Insider, 1/1/0001 12:00 AM PST

warren buffett

Warren Buffett is still bullish on the long-term outlook for US stocks.

The billionaire investor said he expects the index to be "over 1 million" in a hundred years, according to Reuters. He was speaking at an event celebrating the 100th anniversary of Forbes magazine.

He added that it's not an unreasonable forecast given the index was around 81 a hundred years back.

The Dow closed up by 0.18% at 22,370.80 on Tuesday.

Given that, it's worth noting that a value of 1,000,000 in 100 years translates into about a 4% compound annual growth rate, which is lower than the average rate stocks have historically grown.

Buffett's comments at the event reflect one of his long-standing beliefs: that over the long term, the stock market news will be good.

Back in October 2008, in the midst of the financial crisis, he explained that thinking in op-ed for The New York Times titled, "Buy American. I am.":

"Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over. [...]

"Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."

SEE ALSO: 16 brilliant quotes from Charlie Munger, Warren Buffett's right-hand man

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What you need to know on Wall Street today

Business Insider, 1/1/0001 12:00 AM PST

Welcome to Finance Insider, Business Insider's summary of the top stories of the past 24 hours. Sign up here to get the best of Business Insider delivered direct to your inbox.

A Greenwich, Connecticut-based hedge fund is behind the purchase of a block of 46 taxi medallions that were snapped up in a foreclosure auction this week.

The medallions — the metal plates on yellow cab hoods allowing them to legally pick up street-hails — have plunged in value since the arrival of Uber and other ride-sharing services in the city.

They once fetched as much as $1 million but were sold for $186,000 each at the auction, an industry source told Business Insider.

In other news, legendary investor Laszlo Birinyi — who has nailed the bull market at every turn – shares the hidden secret of future stock gains. Traders are making huge bets that the Toys R Us bankruptcy will crush one of its main suppliers. And here's why Amazon is still such a threat to Toys R Us, in one chart. Meanwhile, Best Buy is the latest victim of the retail apocalypse.

144 years ago, the stock market shut down for the first time because of a panic – here's what happened.

In markets news:

Republicans' last-ditch effort to repeal Obamacare is really all about tax cuts. Trump's attempt to rewrite NAFTA pushes a provision that is 'senseless – and unnecessary," according to Jeffrey Schott, senior fellow at the Peterson Institute for International Economics.

The Fed risks repeating a ghastly mistake it made right before the past 2 recessions.

And North Korea's biggest trading partner is China – and it's not even close.

Last but not least, the best time to look for a new job isn't when you hate your current one. It's when you love it.

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Pfizer is taking its fight with J&J over a blockbuster drug to court

Business Insider, 1/1/0001 12:00 AM PST

Pfizer CEO Ian Read

Two of the world's largest drugmakers are heading to court over a blockbuster arthritis treatment. 

Pfizer on Wednesday filed a complaint against Johnson & Johnson, claiming the world's largest pharmaceutical company was taking anticompetitive steps to block the sale of a drug called Inflectra. 

Inflectra is Pfizer's version of J&J's blockbuster drug Remicade — which treats autoimmune diseases like rheumatoid arthritis and Crohn's disease. Approved in 1998, it generated $4.8 billion in sales for J&J.

Because Remicade is made from living cells instead of chemicals, like an antibiotic or a birth-control pill, it doesn't have a generic. Instead, companies like Pfizer built alternatives called "biosimilars."

Pfizer and its partner Celltrion got its biosimilar version of Remicade, called Inflectra, approved in April 2016. The two drugs are both versions of infliximab, but for now the drugs can't be used interchangeably the way you might be able to pick up a generic antibiotic instead of a brand name version at a pharmacy counter. 

When it came out with the drug Pfizer priced Inflectra at a 15% discount to Remicade's list price of $1,113 a vial. A second biosimilar, made by Samsung Bioepis, got approved in 2017 and priced at a 35% discount

Even with the discounts, Pfizer said in the lawsuit, Remicade still retains 96% of the market.Pfizer alleges that's because of contracts between J&J and health insurers that require Remicade — as opposed to Inflectra — to be used first before trying other treatments for new patients.

And, as part of that contract, insurers had to commit to not reimbursing for Inflectra, making it harder for the drug to be used instead of Remicade. Because insurers won't cover Inflectra, the hospitals that deliver the medication don't want to keep it in stock, Pfizer said. 

"Given that it was charging a lower price for Inflectra than J&J was charging for Remicade, Pfizer was optimistic that it would have an opportunity to compete, to secure a reasonable share of the business, particularly for new patients, and to bring the benefits of price competition to consumers, providers, insurers, and the U.S. government," the company said in its complaint. "However, due to J&J’s exclusionary conduct, competition has been foreclosed. J&J maintains its monopoly and has continued to capture over 96 percent of infliximab sales even while maintaining prices far above competitive levels."

Johnson & Johnson did not respond to a request for comment.

Biosimilars haven't saved the billions of dollars they were expected to 

While there has been a lot of hope that biosimilars will help save the US healthcare system billions on costly, biologic drugs, it's taking longer than expected to get to that point. 

"We believe that biosimilars will capture meaningful market share, but the disappointing commercial success so far with less than $2 billion annual sales illustrates that the bar is high," Morgan Stanley analysts said in a report published in April. That's in large part because of the economic challenges that biosimilars face, the report said.

The biologic medicine market is roughly $200 billion, according to Morgan Stanley, which makes that $2 billion a bit lackluster.

The biosimilars haven't come at much of a discount to their branded counterparts (between 15% to 30% discounts to the branded drug's list price, compared to generics that can typically charge 80-90% off the branded version). As a result of the still relatively high cost, many people haven't transitioned over to biosimilars in the same way people have observed with generic drugs.

"While we acknowledge that biosimilars could represent a real sales opportunity, we believe that the economics of biosimilars remains challenged," the note said.

SEE ALSO: The FDA just approved the first direct competitor to a billion-dollar cancer drug

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Best Buy has a plan to fight back against Amazon — and it's working (BBY)

Business Insider, 1/1/0001 12:00 AM PST

Best buy

Best Buy is the place to buy your consumer electronics, or at least it used to be.

The company has been hit hard by the ongoing retail apocalypse and is under pressure from the likes of Amazon to either change the way it does business or face forever-declining sales. So Best Buy is hoping to change.

"Demand for consumer electronics seems solid and Best Buy's service-oriented initiatives could unlock latent demand," Simeon Gutman, an analyst at Morgan Stanley wrote in a recent note to clients. 

Gutman says that "each initiative... represents an opportunity to increase customer retention and loyalty as well as market share."

The most promising of these initiatives, according to Gutman, is the company's In-Home Advisor service. The service, which sends an employee to a customer's home to suggest products and services that could be of use, is free of charge. Gutman says test areas for the service have shown a 30% higher than average order value compared to a comparable store visit. There has been an overall increase in comparable sales in markets where Best Buy is testing the service, according to Gutman.

Best Buy has rolled out 300 full-time In-Home Advisors due to its success, Gutman wrote.

The company also has started other services like Assured Living, which advises customers on smart home equipment that could help monitor elderly or other family members that need assistance. 

Gutman isn't giving the company's plan his signature of approval just yet though.

"The company does not yet have a clear sense of the economics of this transition," Gutman said. Best Buy will have to spend a lot to bring all these services to scale, and it's yet to be seen exactly how much it will cost the company to move more heavily into the services business.

Ultimately, Best Buy's move deeper into services is still about selling and supporting products. Big players in the ecommerce space are dominating retail, and no amount of pivoting will save Best Buy if everyone begins to buy their products from Amazon.

Gutman rates Best Buy a neutral and has a price target of $58. Shares are up 22.24% this year.

Click here to see what other analysts have to say about Best Buy...

best buy stock price

SEE ALSO: Best Buy is the latest victim of the retail apocalypse as pressure from Amazon sends shares plunging 10%

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A Greenwich hedge fund is behind the mysterious buyer of the NYC 'Taxi King's' medallions

Business Insider, 1/1/0001 12:00 AM PST

taxi times squareA Greenwich, Connecticut-based hedge fund that focuses on distressed credit and special situations is behind the purchase of a block of 46 taxi medallions that were snapped up in a foreclosure auction this week.

The medallions — the metal plates on yellow cab hoods allowing them to legally pick up street-hails — have plunged in value since the arrival of Uber and other ride-sharing services in the city.

They once fetched as much as $1 million but were sold for $186,000 each at the auction, an industry source told Business Insider. They once belonged to Evgeny "Gene" Freidman — a man known as the 'Taxi King' — who is now in legal and financial trouble as the value of his assets plunged.

The buyer, identified in bankruptcy court documents as MGPE Inc., was incorporated in 2010 by Mark Zoldan, who is chief financial officer of Marblegate Asset Management, legal filings show. We called Marblegate to ask about its strategy with the medallions and how MGPE fits in, but the firm declined to comment.

Hedge funds are closed to most public investors so they only have to disclose a very limited amount of information.

Marblegate manages about $627 million, which could include borrowed money, according to a regulatory filing. Marblegate describes its investment strategy as seeking "to purchase high yield and leveraged corporate credits and claims at a discount to intrinsic value and to realize the value of investments through a combination of restructuring, recovery and refinancing."

Andrew Milgram and Paul Arrouet are the firm's managing partners with Milgram serving as the chief investment officer — meaning they're the ones making investment strategy decisions. 

Of course, we can't say what MGPE's strategy with the medallions is  — but there are more ways than one to make a profit off this purchase. For one, because they were bought in a foreclosure auction and in a large block, the medallions probably went for below what they might fetch in the open market. Also, the medallion owners can generate income by leasing them out to taxi companies or individual drivers – who can't ply their trade without one. 

The $186,000 medallion price is not expected to become the new normal for future medallion auctions, according to Matthew Daus, who served as head of the Taxi & Limousine Commission for more than eight years.

"These medallions were foreclosed upon as a part of Freidman’s bankruptcy," said Daus, who currently works for the law firm Windels Marx. "These bulk bargain bids are not indicative of a medallion’s true market value."

He says hedge funds are a rare sight in the taxi industry.

Then, of course, there's the potential that this reflects a view that the hit that the taxi industry has taken from Uber is coming to an end, and the medallions will start to regain value.

SEE ALSO: A mysterious hedge fund just scooped up the foreclosed medallions from New York City's 'Taxi King'

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CREDIT SUISSE: It’s 'difficult to see light at the end of the tunnel' for Bed Bath & Beyond (BBBY)

Business Insider, 1/1/0001 12:00 AM PST

bed bath and beyond

Shares of Bed Bath & Beyond are plunging more than 15% on Wednesday after the retailer announced disappointing quarterly results.

The home furnishings chain reported earnings of $0.67 a share, well shy of the $0.95 that Wall Street had expected.

Bed Bath & Beyond is certainly not alone in its struggles as companies across the country are having difficulty keeping up with Amazon.

In a note to clients on Wednesday, Credit Suisse warned that "it's difficult to see light at the end of the tunnel."

"Price and service gaps remain, the assortment advantage is less clear today, investments likely need to continue, and sector has yet to reach an equilibrium from a supply/demand perspective," analysts Seth Sigman, Kieran McGrath, and Lavesh Hemnani wrote.

The Swiss bank cut its price target for Bed Bath & Beyond from $33 to $25, just below Wall Street consensus of $26.28, according to Bloomberg.

In its earnings call, Bed Bath & Beyond said that restructuring changes, Hurricane Harvey, and a new accounting standard contributed to the losses.

Credit Suisse thinks the magnitude of the miss could actually create new opportunities for the company to make positive strategic changes. The bank complimented Bed Bath & Beyond's ramping up of its online business, which still only accounts for 15% of total sales.

"In theory, the investments needed in technology, price, and marketing are best done outside of the public eye. But, leverage is not as low as its been," the bank said.  "More importantly, for retailers that don't own their own brands, the scenarios have become more limited."

Bed Bath & Beyond BBBY stock price chart

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THE RAY DALIO INTERVIEW: The billionaire investor on Bridgewater’s 'radically transparent' culture and how to bet on the future

Business Insider, 1/1/0001 12:00 AM PST

Bridgewater Associates founder Ray Dalio sat down with Business Insider EIC Henry Blodget to discuss his book "Principles: Life and Work," the culture of Bridgewater, and his outlook for the future.

"Principles: Life and Work" is the first of two planned books, and includes a short autobiography along with an expanded version of the "Principles" that all Bridgewater employees read when joining the company. Following is a transcript of the video. 

HENRY BLODGET: Ray Dalio is one of the most successful investment managers in history. He's built a firm, Bridgewater, that is the largest hedge fund by multiples, most successful. He's now written a book called Principles, in which he's kind enough to tell us how he did it and how we can do it. Ray, thank you so much for joining us.

RAY DALIO: Thrilled to be here.

BLODGET: So here's your book, congratulations. I know firsthand how hard it is to write a book, and this is a particularly long and pithy one. So congratulations.

DALIO: Thanks.

BLODGET: So let's start right at the beginning. The first sentence, you say I want to establish that I am a quote “dumb s***” who does not know everything he should know. What do you mean by that? It's a very charming and disarming start, but what are we supposed to take away from that?

DALIO: Well, I think it's important I know that the key to my success has not been so much what I know as much as how I deal with my not knowing. And that's basically a big theme in the book. How do you have an idea meritocracy? Only two things that you need to do in order to be successful. The first is you have to know what the right decisions to make are, and then you have to have the courage to make them. And most people don't have in their head the right decision. And I think one of the greatest tragedies of man is that they hold onto opinions in their heads that are wrong, and they don't go out there and stress test them.

So we have an idea meritocracy. I mean, there's a reason I wrote this book before I wrote Economic and Investment Principles 'cause that's really more sort of my skill set. But in building an organization and/or dealing with the markets, to be able to have independent thinking and go beyond what you all individually know in order to get the best is the key to success.

BLODGET: You share in detail your own development of coming to developing these principles. One of the events that you share would have been wildly traumatic for most people is that you talk about being fired from Shearson for punching your boss in the face. What happened there?

DALIO: Well, that was just a, you know, I was kind of wild then, and it was New Year's Eve. And I got drunk, and he got drunk. And you know, we did that. And I punched him. I didn't get fired for that. He was a good guy. We came in on the following Monday morning, and he said, okay, we'll get it past us. I got fired for doing something else, not for that.

BLODGET: Okay.

DALIO: But I was kind of a rebellious. The thing that affected me the most, I would say, was being so wrong in 1982 when the bottom of the stock market, on other words, I had anticipated that there would be a debt crisis with Mexico. And in August, Mexico defaulted on its debt, and I thought we were gonna have an economic crisis because there would be this worldwide debt crisis, which occurred, and —

BLODGET: Right, and just to set the scene, this was, you had left Shearson. You had started Bridgewater. You'd had many years of being very successful. You had gotten very confident, and you've made this huge controversial bet that we were headed into the next Great Depression and then.

DALIO: Right, the defaults came. Mexico defaulted in August of 1982. I thought, wow, we're gonna go in this crisis, and everything's gonna fall apart. That was the exact bottom of the stock market. I couldn't have been more wrong. And it was painfully wrong because I had built the company until that point.

We were a tight group, small group of people. I had to let everybody go. I was so broke, I had to borrow $4,000 from my dad. I had testified to Congress 'cause they asked me to explain this. I had been on Wall Street Week. All of those mistakes, and it was very painful experience. And it turned out to be probably the best experience of my life because it changed my attitude about thinking.

In other words, rather than thinking I'm right, I went to thinking how do I know I'm right? And it created this open-mindedness, to be able to then go, fine. The smartest people who disagreed with me, and to see how they would think about things, to balance my bets better. It taught me a radical open-mindedness. It taught me what you're referring to in the beginning of the book that I'm trying to convey, that the power of radical open-mindedness and an idea meritocracy is such a powerful thing.

BLODGET: And you talk a lot about how this process of pain, and I can imagine it was just, again, a gut-wrenching experience of having to fire all of your friends. You have to rebuild from zero. You start going forward. You have to look in the mirror and say, hey, I was way too arrogant and confident. I have to effectively relearn. That's not an easy thing to do.

DALIO: Right, I have a saying. Pain plus reflection equals progress, right. And I began to develop this knee-jerk reaction. If pain is a signal that something is wrong, that you did something, if you make those mistakes, and then to take that pain and to calm oneself down and think what would I have done differently in the future? So my instincts changed.

I view those experiences now like solving puzzles that'll give me gems. The puzzle is, what would I do differently in the future so I would get a better result? The gem is the principle that I would write down as I learned it, so literally by writing down the principle, when this one comes along, what do I do with it? Everything is another one of those. Like, we have a million those.

BLODGET: Yes.

DALIO: If you start to say, when one of those comes along, how should I bet steer with it, and you write down that recipe. Those are the principles. So I found that exercise to be great, and I also found that I could turn those principles into algorithms.

So let's say our investment process, those criteria are built into literally algorithms and data can come in. So I found that process of encountering pain to produce reflection to produce better ways of doing it to produce principles and then carrying that forward to the decision-making has been invaluable and to do that with people who are gonna disagree with me and to know how to do that well. That's been the key to success.

BLODGET: And one of the first and most important principles that you outline is embrace the truth whatever it happens to be.

DALIO: Right, a reality.

BLODGET: And one of the very striking moments in the book is when you talk about how your top managers after you rebuilt Bridgewater into a success again. Basically, they came to you and said, look. Here's what Ray does well. He's a genius money manager and thinker and so forth, but here's what Ray doesn't do well, and I have to read this because for anybody leading other people, just a very startling quote. It says, quote, "Ray sometimes says or does things to employees that make them feel incompetent, unnecessary, humiliated, overwhelmed, belittled, oppressed, or otherwise bad." And you say very candidly, your first reaction was ugh.

DALIO: I'm like, I don't want to do that. These are the people I work with. I don't want to have those consequences. And on the other hand, it's this radical straight forwardness, and I want them to speak to me in a straight forward way, so we were at a moment. That's a painful moment. And then it's a moment of reflection. Should I not be as straight forward? Should they not be? What could I do differently? So what we decided to do was deal with it together. Like I thought that I should then ask the questions. Do you not want me to tell you what I think? Do you, I would appreciate you doing the same with me in that straight forward. So how should we be with each other? And by agreeing how we should be with each other and writing those things down so that this is what we're doing, we began to get more of the management principles of how we are with each other because it's the key to our success.

But it can be painful. It can be not understood well. There's things in our brain. Neuroscientists tell me that there's a part of our brain, which we call the prefrontal cortex, the thoughtful part of our brain, in which we sort of want to be radically straight forward. We'd like to know what our weaknesses is 'cause it's logical. And then there's an emotional part of the brain. We understand the amygdala that is the fight or flight. And it takes disagreement and it converts that into a battle, and it's not easy. And so those two parts of our brains are at odds, and if we understand that and we work ourselves through.

At the end of the day, can I be radically truthful with you? Like, what's so bad about us being radically truthful with each other and radically transparent?

I want to say one more thing so you understand Bridgewater. Okay, Bridgewater is an idea meritocracy in which the goal is to have meaningful work and meaningful relationships. They're equally important. But to do those through radical truthfulness and radical transparency. So you're on a mission together: meaningful work. And you have these relationships in which you care. If you have those relationships and you can understand that there's caring at the same time that there's holding each other to high standards, if there's tough love, that that's a very powerful force. And by being radically truthful and not political and being radically transparent, we've been able to do that. So that's the secret sauce. In other words, it's explained more comprehensively there, but the results speak for themselves.

BLODGET: And you talk about the two parts of the brain, the logical part, the emotions, a lot of the book sounds like the process you've created is to take the emotion out of everything. Turn the business into a machine. Make all decisions. Use computers to aid decision-making. Is there any part where emotion helps?

DALIO: Well, emotions —

BLODGET: What about passions?

DALIO: I think emotion is the most important thing, so let me distinguish between two things. There's emotion that's beneficial to you, and there's emotion that's detrimental to you. If your emotion is going to cause you to do something that you're going to regret later, that's a problem. If the emotion helps you do the things that you want, so I think the most important things are emotion, the emotion of inspiration, the emotion of love. These are things, that's what I'm working for.

The emotions that we don't want to have is those that we regret afterwards. So the notion is here is to deal emotion and not just take it out, but to put it in its right place. So for example, if somebody's having an emotional moment in a conflict, then you say, how should we best handle it? Do we put it aside, and we'll deal with it a little bit later? Do we have somebody help us through our conversation? Do we communicate by another vehicle, email, so that it can be logical and seem less emotion?

The important thing is in order to have an idea meritocracy you have to do three things. First, you have to put your honest thoughts on the table for everybody to see. So if everybody can put their honest thoughts on the table for everybody to see, that's a great thing. A lot of people have problems doing that, but that's the beginning.

BLODGET: Difficult, scary.

DALIO: But not if it's the, you gotta do it. Otherwise it's all the scenarios going on in your mind that might be wrong, and it's not honest. So what should be the problem? There should be no problem. You should be feel good. Put it on the table. Let's look at it. Let's do it well. The second step that you need to do is to have thoughtful disagreement. In other words, to know how to disagree well, to take in information and pass it through and to think things through. And so we have protocols for doing that.

So we have a two minute rule and things that I can describe, are described in the book, that allow that protocol to have a quality exchange so that you together can get all of you to a better place than you could individually. That's the power, right, and then you have a process that if you have a disagreement that remains, how do you get past that disagreement? And so you have to have a way.

Ours is what we call believability-weighted decision-making. And I can explain this if you want me to. But in any relationship, you need to have those things. Can you speak honestly with each other? Do you have good ways of working through disagreement in a productive way? And do you have ways of getting past your disagreement? That's true for any relationship, right?

BLODGET: And one of the other principles that you stress is this idea that you should teach your team to fish rather than giving them fish, but you gotta give 'em room to make mistakes. This is something that Jeff Bezos and many other incredibly innovate entrepreneurs have stressed again and again. We have to get over the fear of mistakes. This seems to be a key part.

DALIO: Well, you learn from mistakes and learn from pain. Like I say, you can scratch the car, but you can't total the car. Okay. Mistakes is one of the best sources of learning, right. Successes mean you do the same thing over again, and okay, that's fine, but mistakes that are painful stick. When I look back on my career, I think that the mistakes were the best thing that happened to me.

I remember my mistakes better than I remember my successes. Somehow there must be more of the successes to get me where I am, but I remember all the mistakes, and I remember the lessons. So that's what I mean by pain plus reflection equals progress. So yeah, it's okay for you to make mistakes. It's not okay for you to not learn from those mistakes. That's a principle in there, right. And so you have a culture that operates this way.

If you don't have a culture that operates this way, it's not gonna be self-reinforcing. And so the reason I'm talking about these types of principles rather than my economic and investment principles, which'll come out in the next book is because these are the most fundamental principles, which are the basis of success. And they're not just in investment, investment firms principles. It's not just a hedge funds principles. It's like life principles and how we're gonna deal effectively with each other.

BLODGET: Let's talk a little bit about investing. One of the things, as I've learned more about Bridgewater that I hear again and again, is you've, the radical transparency in the culture and among employees, but your actual investment book and decisions are kept to a very small group. Is that for competitive reasons? Why do you do that?

DALIO: Well, proprietary reasons on anything like the particular algorithms, the trades that we're doing. It would be disadvantageous to our clients if we were to make that all public. But the concepts are economic and investment concepts I'm happy to share. I did this 30 minute video basically how the economic machine works, and in 30 minutes I told the most important things that I know about the economy 'cause I want to pass that along. I want to pass along things that are gonna be helpful to people.

I'm at a stage in my life where now my primary goal isn't to be more successful. My primary goal is to help other people be successful. When I first did this, I thought this was presumptuous. In 2008, we anticipated the financial crisis and did well, which received a lot of attention, and there were stories about what this environment is like that were not accurate. And I tried to stay below the radar, no media. And then I was suggested I put the principles online. They were downloaded over three million times, and I received a lot of thank you notes and so on.

Well, at this time, I think that I sort of have a responsibility to pass along the things that I think are valuable along those lines. And I hope it'll encourage other people to do it. When I think about the, if I think about Jeff Bezos, Jeff Bezos is a man who made, who has formulas for successes. He's got recipes, and I think of principles are recipes for success.

So wouldn't it be great if Jess Bezo had a book of recipes and that you say, when you encounter that thing, what do you do when you encounter that thing? And I hope to encourage. In fact, I am encouraging a number of people. I won't mention their names, but they're kind of luminaries, fabulously successful people will be giving me principles and writing principles, and I think if we look at those principles so when we encounter another one of those things we have principles to go to.

I think it would be good for you to write your principles. And each person to write their principles and also to walk the talk so that way others know what you stand for and are you operating that way? I think at this time it's important to be principled. I think our country needs to restate, you know, what are the principles that bind us together? What are the ones that divide us? How should we be with each other? Then we have idea meritocratic decision-making. Can we deal with who knows who's right, and how do you work those through? So this is something that's much more pervasive and I think very important.

BLODGET: Wow, I think on behalf of everybody who reads your book, it's been very valuable. I've learned a lot from you, from Jeff Bezos, Steve Jobs, and others. There's so much to soak up from that, so it's great. On investing, you've recently written that risks are rising because of the political atmosphere. You've talked about how it looks a lot like 1937. That sounds very scary. What do you mean by that?

DALIO: Well, let me clear up this. This is not like 2007-08 when in 2008, we could do the calculations of how much debt had to be paid by whom and we could see that that wasn't gonna happen, and we were gonna have a financial bust and that. By and large, economically we are at the part of the cycle that is not too hot and not too cold, and assets have the right risk premiums and so on, so it's a relatively stable kind of environment. On the other hand, it's very much like the '30s in that in 1929-32, like 2008, we had a debt crisis. Took your interest rates to zero, both of those times, and when interest rates hit zero, you don't have the same kind of monetary policy, so they print money. They buy financial assets. In both cases they did. That caused an economic rebound in both of those cases. And it caused the stock market to rise a lot in those particular cases, and at the same time, it did not resolve the wealth differences.

So that today, the top 1/10 of 1% of the population has a net worth that is equal to the bottom 90% combined. Okay, the wealth is the largest wealth gap that there has been since the 1935-40 period, and so while we have good conditions here, for the bottom 60% of the population, we have bad conditions. So the averages don't convey what the picture is because of this disparity. So what was tapped into and what we see is there's a large percentage of the population who is hurting and that there's a conflict between the haves and the have nots and liberal ideas and conservative ideas and all of that, and we are having a greater polarity.

In the '30s, we had populism. In other words, the selection of leaders who were strong leaders in a battle of one segment against the other segment inclined to fight for certain things. So as we come into this period, it's somewhat similar to that. We will have, as we go forward, obligations. Demographics is going to affect our obligations. We're right now at the point where pension obligations, not only debt obligations, pension obligations, health care obligations, all of those are going to gradually sort of squeeze us, and we have that division. And so it's very similar to that. And we're also at the point where 1937 was when the feds said we could tighten monetary policy. And they put a slight tightness in monetary policy.

In my opinion, the risks are asymmetric on the downside. In other words, if you tighten monetary policy certainly by more than is discounted in the market and what's discounted in the market is very minor rise in market that that will reverberate through asset class prices as well as then you can have a situation in terms of the economy.

So it's similar in that interest rates are close to zero, not much room on the downside. Obligations are large. There is a political division. There is more populism. Therefore, there's more conflict. And therefore we need to be very careful at this moment. That's what I'm basically saying.

BLODGET: And you have spent more than 45 years betting on the future. Given that picture you just painted, what is your bet for the future?

DALIO: Well, I think we're in the process of watching how conflict is going to be handled politically, and that's being reflected not only internationally with something like Korea or Iran and so on, but we're also dealing with conflict on taxes and so on. I think that one of the things that Donald Trump did extremely well was to identify a constituency that was not heard, and he did that as a pro-business person. In other words, somebody who is going to be business-like and create that environment.

That group could have been tapped into also by more of a socialist, and what we have is a capitalist who is doing that. But in any case, whether socialists and capitalists working together to focus on that, I think that issue has been raised and now we deal with the issue. We're going to find out. The question is really is Donald Trump, he's gonna be aggressive. Is he aggressive and thoughtful? Or is he aggressive and reckless, and when we work through these situations, we're going to find out more and more. I think the fact that he's working across the lines, personally, I like the negotiations with the Democrat side.

BLODGET: I think a lot of Americans do.

DALIO: And so on and to see, cut that deal in a way if we can to also deal with the whole of the economy is something that I'm all in favor for. So we're in the process of finding this out, right.

BLODGET: You recommend that most portfolios should contain some gold.

DALIO: Yeah, of course.

BLODGET: Why? A lot of people think it's not of course. In fact, it doesn't make sense.

DALIO: Well, first of all, the best way to structure a portfolio is to have the right kind of balance in your portfolio, and some amount of gold. Gold serves a purpose. It is first of all, a diversifier against other assets. You know, we have this risk on, risk off thing. We also have a monetary system. The Bretton Woods monetary system began after World War II, and it had the dollar as the world's reserve currency. There's a risk there. There's a lot of dollar denominated debt and so on. If somebody felt they didn't want to hold that, and so you could have exposures to that.

So it's a diversifying asset that is sensible, and that's the main reason to have gold in the portfolio, five to 10%. People, I don't understand it. People will have more in terms of cash. The key in terms of being able to have a successful portfolio as your core portfolio. In other words, what's your strategic asset allocation mix? What is your, if your, let me —

BLODGET: I got it. Let me ask you about Bitcoin.

DALIO: Okay.

BLODGET: Bitcoin, people say the same thing. It's a store of value. You gotta diversify. The dollar's not safe. It's been going up and up and up. Yet recently it crashed. Jamie Dimon came out and said, it's complete fraud. He'd fire anybody at JP Morgan who invested in it cause he wouldn't want people that stupid working for him. What do you think?

DALIO: There are two purposes of a currency. Is it a medium of exchange? And is it a storehold of wealth? Those are the basic ingredients. Bitcoin is not an effective medium exchange by and large. I have a Bitcoin. I want to go buy things. It's not easy to buy things with the Bitcoin, and in terms of a storehold of wealth, a storehold of wealth more reflects, like gold more reflects the opposite of what money is doing, right?

And so you look at it. It's a storehold of wealth.

Bitcoin is a speculative bubble, right. Its price is like a greater fool theory in terms of its price. If you say, what is its intrinsic value? If Bitcoin was made to a more effective medium of exchange, and also operated in terms of a storehold of wealth, not of the reflection of that volatility, it would be a viable instrument. It is, to me, a vehicle for speculation that's attracting people in, and it has all the classic ingredients of a bubble. People are leveraging themselves up. It doesn't have that same intrinsic value. Even the privacy value, okay, is suspicious.

In other words, it has a purpose to some extent. If you're living in a country, and you don't know your currency, whether it's gonna be good or not, and you might try to hold that. But that thing you're holding is running around like crazy for reasons that you don't understand, so it's not gonna be an effective storehold of wealth, and the privacy will be stress-tested.

In other words, governments are examining who is operating in their own clever ways of what that, and so you can't even assume, so it's gonna be a privacy vehicle. So I don't see the effectiveness of Bitcoin. I could see cyber currencies and so on, crypto-currencies, but this is not what we're having. You know, it's a possibility that I think has been captured as a speculative vehicle that's in the middle of a bubble.

BLODGET: You said something else about investing that I think is very profound and simple that I think a lot of people don't understand, which is to be successful as an investor, you have to bet against the consensus and be right. First of all, why? Why can't we just buy stocks we think are gonna go up.

DALIO: Well, the consensus is built into the price. So because the consensus is built into the price. And assets price themselves in a way that they're all compete, and they're all of equal value in a certain sense. There's risk premium of equities over cash and bonds will have that over whatever, but basically, they're all priced that way. So like think of it as going to betting on a sports team or in other words, or horse racing.

Okay, there's handicapping that's going on. So in order to be successful, you're betting against the consensus, and you have to be right. That's the game.

BLODGET: And you describe your first trade when you were a teenager. You bought a stock. It tripled. You thought, hey, this is easy. But you convey very effectively that in fact, it is extremely difficult even though it seemed so simple.

DALIO: Being successful in the markets is more difficult than being successful in competing in the Olympics. Your odds are higher to be successful competing in the Olympics because you have more people trying to do it. You have more resources. We put hundreds of millions of dollars. We have at Bridgewater, 1,500 people. We're now competing against other teams, and that's the kind of resources that are going into playing that particular game. So think about that in terms of handicapping it. It's not an easy thing to do. What you can do is achieve balance. To know how to hold a balanced portfolio, and to receive something that is a return that is much better than cash achieving balance is something that you can do, and I think that that, but figure. If you're going to enter the game, since value added is a zero sum game, you have to ask. Who are you playing against? Who are you going into the poker game with? Do you want to do that?

BLODGET: And as you talk to people in the real world, is your sense that people understand what they're up against when they might buy a stock or try to time the market?

DALIO: Institutional investors who are smart by and large understand that. The average man tends to be much more reactive if you look at the purchases and sales that they make. When something goes up, they're more likely to buy it. They think, ah, that's a good investment. They don't know how to measure that in terms of oh, is that a much more expensive investment that's more likely to go down?

So that's why, you know, you put in ads in newspapers, and they say, ah, that's what had that return. That's what they're attracted to. They tend to buy high and sell low, and so an average man should not be playing this game in that way. They should be playing the game, or humility. If you think that you're good at playing the game, just make sure, it's like going to the poker table or going to the race track. Do it with a little bit of money, and watch it. And get the best advice that you can to know that you're gonna be able to take money out of the system rather than put it in.

BLODGET:  Ray, you've written a terrific book. Thank you so much for sharing your life and wisdom, and best of luck. Congratulations.

DALIO: Thank you.

BLODGET: Thanks.

DALIO: Appreciate it.

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Apple is slipping after disappointing reviews of the new Apple Watch (AAPL)

Business Insider, 1/1/0001 12:00 AM PST

Apple Watch Series 3

Apple shares are down 1.82% on Wednesday following disappointing reviews of the Apple Watch Series 3.

At its recent product launch event, Apple said the Series 3 would be available with an LTE cellular connection, which theoretically would allow users to make phone calls and stream music without carrying their phone.

Reviews of the new watch were posted on Wednesday morning, and most were users were disappointed with the product.

Some marquee features of the watch, like voice calls and Siri, failed to work reliably because of its shoddy cell connection.

The cell connection, which costs $10 a month, drains the battery quickly according to most reviewers. Many experienced about half a day of battery life from the watch when using the cell connection heavily.

“When Apple Watch Series 3 joins unauthenticated Wi-Fi networks without connectivity, it may at times prevent the watch from using cellular," Apple said in a statement. "We are investigating a fix for a future software release.”

Apple is up 34.15% this year, including Wednesday's drop.

You can read a full roundup of the reviews here.

apple stock price

SEE ALSO: Reviewers say the new Apple Watch is pretty bad

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NOW WATCH: Bitcoin's bubble swells with a new record high

Decred Adds Atomic Swap Support for Exchange-Free Cryptocurrency Trading

Bitcoin Magazine, 1/1/0001 12:00 AM PST

Decred Adds Support for Atomic Swaps for Direct Cryptocurrency Trading Without Exchanges

Decred is announcing support for on-chain atomic swaps, which will allow cryptocurrency holders to trade directly, without having to rely on external exchanges. The cryptocurrencies initially supported are Decred (DCR), Bitcoin (BTC) and Litecoin (LTC).

“Support for on-chain atomic swaps is extremely useful,”Jake Yocom-Piatt, Decred Project Lead said in a statement. “Thanks to the foresight of the Lightning Network authors and developers, and the dedication of our own developers, it is our pleasure to deliver an important capability that has been discussed since the concept of cross-chain atomic transfers was proposed in 2013.”

Users can already begin performing exchanges between DCR, BTC and LTC using tools that the Decred developers have created. The tools are text-based at the moment, but will be integrated into the Decrediton GUI wallet in a future release.

According to the Decred team, this advancement disintermediates the exchange process, allowing for greater market fluency. It also delivers on the market desire for improved interoperability between currencies and the demand for new efficiencies that drive investor value.

"This is the first step in a progression toward high-utility, non-Turing complete smart contracts,” Yocom-Piatt told Bitcoin Magazine. “We look forward to a new generation of greater fluency between projects. It was a pleasure collaborating with the dev teams at Litecoin and Lighting Labs."

The concept of atomic swaps (or atomic cross-chain trading) were first described by Tier Nolan back in 2013. A previous Bitcoin Magazine article provides a step-by-step explanation of a simple example where two users agree to swap agreed amounts of BTC and LTC and use the multisig and time lock features available in both Bitcoin and Litecoin basic scripting to synchronize two transactions on two independent blockchains without having to trust each other.

It’s worth noting that Lightning Network payment channels, now enabled by SegWit, make atomic swaps more powerful and easier to implement, and permit adding support for off-chain swaps.

“The addition of LN support allows for both on-chain and off-chain atomic swaps, meaning that trustless cross chain exchanges can occur,” noted Yocom-Piatt. “Since supporting LN does not break any existing functionality and only adds to Decred’s capabilities as a system of value storage and transmission, it is a very attractive target for addition to Decred.”

“On-chain atomic swaps are an important step towards enabling peer-to-peer cryptocurrency trading,” said Laolu Osuntokun, Lightning Network Daemon (LND) lead developer. “We are excited for this process to continue with off-chain atomic swaps over the Lightning Network in the near future. By taking this process off-chain, substantial latency and privacy improvements can occur.”

Decred (DCR) describes itself as “digital currency for the people,” completely independent, community funded and community owned. The project wants to build an open and progressive cryptocurrency with a system of community-based governance integrated into its blockchain,  including a hybrid consensus system to ensure that no group can control the flow of transactions or make changes to the currency without the input of the community.

“Decred is Bitcoin as it should have been,” noted crypto-investor Jon Creasy. “Bitcoin would be of the people, for the people. As great an idea as this was, however, Bitcoin soon became controlled by an ‘oligarchy,’ so to speak.”

It’s important to note that some countries, such as China, are attacking cryptocurrency exchanges as the weakest links in the crypto ecosystem. The Decred move shows that, at least for crypto-to-crypto trading (for example, exchanging bitcoin for litecoin), it’s perfectly possible to operate without exchanges. However, it doesn’t solve the problem of crypto-to-fiat and fiat-to-crypto trading, which is arguably of top concern for cryptocurrency users.

The post Decred Adds Atomic Swap Support for Exchange-Free Cryptocurrency Trading appeared first on Bitcoin Magazine.

Decred Adds Atomic Swap Support for Exchange-Free Cryptocurrency Trading

Bitcoin Magazine, 1/1/0001 12:00 AM PST

Decred Adds Support for Atomic Swaps for Direct Cryptocurrency Trading Without Exchanges

Decred is announcing support for on-chain atomic swaps, which will allow cryptocurrency holders to trade directly, without having to rely on external exchanges. The cryptocurrencies initially supported are Decred (DCR), Bitcoin (BTC) and Litecoin (LTC).

“Support for on-chain atomic swaps is extremely useful,”Jake Yocom-Piatt, Decred Project Lead said in a statement. “Thanks to the foresight of the Lightning Network authors and developers, and the dedication of our own developers, it is our pleasure to deliver an important capability that has been discussed since the concept of cross-chain atomic transfers was proposed in 2013.”

Users can already begin performing exchanges between DCR, BTC and LTC using tools that the Decred developers have created. The tools are text-based at the moment, but will be integrated into the Decrediton GUI wallet in a future release.

According to the Decred team, this advancement disintermediates the exchange process, allowing for greater market fluency. It also delivers on the market desire for improved interoperability between currencies and the demand for new efficiencies that drive investor value.

"This is the first step in a progression toward high-utility, non-Turing complete smart contracts,” Yocom-Piatt told Bitcoin Magazine. “We look forward to a new generation of greater fluency between projects. It was a pleasure collaborating with the dev teams at Litecoin and Lighting Labs."

The concept of atomic swaps (or atomic cross-chain trading) were first described by Tier Nolan back in 2013. A previous Bitcoin Magazine article provides a step-by-step explanation of a simple example where two users agree to swap agreed amounts of BTC and LTC and use the multisig and time lock features available in both Bitcoin and Litecoin basic scripting to synchronize two transactions on two independent blockchains without having to trust each other.

It’s worth noting that Lightning Network payment channels, now enabled by SegWit, make atomic swaps more powerful and easier to implement, and permit adding support for off-chain swaps.

“The addition of LN support allows for both on-chain and off-chain atomic swaps, meaning that trustless cross chain exchanges can occur,” noted Yocom-Piatt. “Since supporting LN does not break any existing functionality and only adds to Decred’s capabilities as a system of value storage and transmission, it is a very attractive target for addition to Decred.”

“On-chain atomic swaps are an important step towards enabling peer-to-peer cryptocurrency trading,” said Laolu Osuntokun, Lightning Network Daemon (LND) lead developer. “We are excited for this process to continue with off-chain atomic swaps over the Lightning Network in the near future. By taking this process off-chain, substantial latency and privacy improvements can occur.”

Decred (DCR) describes itself as “digital currency for the people,” completely independent, community funded and community owned. The project wants to build an open and progressive cryptocurrency with a system of community-based governance integrated into its blockchain,  including a hybrid consensus system to ensure that no group can control the flow of transactions or make changes to the currency without the input of the community.

“Decred is Bitcoin as it should have been,” noted crypto-investor Jon Creasy. “Bitcoin would be of the people, for the people. As great an idea as this was, however, Bitcoin soon became controlled by an ‘oligarchy,’ so to speak.”

It’s important to note that some countries, such as China, are attacking cryptocurrency exchanges as the weakest links in the crypto ecosystem. The Decred move shows that, at least for crypto-to-crypto trading (for example, exchanging bitcoin for litecoin), it’s perfectly possible to operate without exchanges. However, it doesn’t solve the problem of crypto-to-fiat and fiat-to-crypto trading, which is arguably of top concern for cryptocurrency users.

The post Decred Adds Atomic Swap Support for Exchange-Free Cryptocurrency Trading appeared first on Bitcoin Magazine.

The dollar is hovering in suspense ahead of the Fed

Business Insider, 1/1/0001 12:00 AM PST

janet yellen

The dollar isn't budging ahead of the conclusion of the Federal Reserve's September meeting.

The US dollar index was little changed at 91.73 at 8:48 a.m. ET.

On Wednesday, the Fed is expected to keep its benchmark interest rate unchanged between 1% and 1.25% and announce the process for unwinding its massive balance sheet.

The greenback has fallen 9.4% versus a basket of its peers since President Donald Trump's inauguration on January 20.

As for other FX news, here was the scoreboard at 8:53 a.m. ET:

  • The euro is little changed at 1.1993 against the dollar after data showed German PPI rose 2.6% year-over-year in August, above expectations of a 2.5% jump.
  • The British pound is up 0.2% at 1.3534 against the dollar after retail sales rose 1% month-over-month in August, above expectations of 0.2%.
  • The Japanese yen is higher by 0.2% at 111.43 per dollar.
  • The Canadian dollar is stronger by 0.3% at 1.2256 per dollar.
  • The Russian ruble is up 0.6% at 57.8120 per dollar.

SEE ALSO: We're officially in the 2nd-largest bull market since World War II

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NOW WATCH: Bitcoin's bubble swells with a new record high

Bombardier slams Boeing's lawsuit against it, says it's 'pure hypocrisy'

Business Insider, 1/1/0001 12:00 AM PST

Bombardier CS100 Delta

  • Boeing alleges Bombardier is dumping its planes on the US market at below-market prices.
  • Bombardier's 2016 sale of 75 C Series jets to Delta is at the heart of the matter.
  • Bombardier calls Boeing's allegations "pure hypocrisy."

In April, Boeing filed a complaint that claimed Bombardier allegedly dumped its new C Series airline on the US market at illegally low prices.

On Monday, Bombardier hit back at Boeing's claims calling it "pure hypocrisy."

The heart of the matter lies with Delta Air Line's landmark 2016 order for 75 new C Series airliners worth $71 million each at list value.

However, Boeing alleges that Bombardier actually sold the planes for just $19.6 million, far less than the $33.2 million it cost the Canada firm to make the planes.

"Bombardier shares Boeing's commitment to a level playing field, but in this case, they were not even on the field," Bombardier said in a statement. "Delta ordered the C Series because Boeing stopped making an aircraft of the size Delta needed years ago."

The Bombardier CS100 ordered by Delta is a 108-seat medium-range narrow airliner. It's Boeing counterpart would the 737-600. However, it's been half a decade since Boeing last included the 737-600 in its annual price list. Instead, the company has been marketing the larger, more expensive, and more profitable 737-700.

Bombardier CS100 C Series DeltaIn addition, Bombardier characterized Boeing complaint as an attempt to "tilt the playing field in its favor and impose an indirect tax on the U.S. flying public through unjustified import tariffs."

"Boeing welcomes competition and Bombardier can sell its aircraft anywhere in the world," a company spokesman told Business Insider in an email. "But sales must be made according to globally-accepted trade rules."

"Boeing had to take action as subsidized competition has hurt us now and will continue to hurt us for years to come, and we could not stand by given this clear case of illegal dumping," the Boeing spokesman added.

Finally, Bombardier alleges that Boeing also engaged in heavy discounting of its revolutionary 787 Dreamliner, in some instances losing an average of $25 million per plane for an entire quarter

"It is pure hypocrisy for Boeing to say that the C Series launch pricing is a "violation of global trade law" when Boeing does the same for its new aircraft," the Canadian airplane maker added.

Bombardier C Series CS100 DeltaHowever, Boeing claims that Dreamliner is now a profitable program with healthy market demand. 

The Montreal-based company noted that Boeing's legal action put thousands of jobs in the Canada, the US, and the UK in jeopardy.

In response, Boeing noted that it contributes $3.3 billion annually to the Canadian economy and accounts for 14% of the economic impact Canada's aerospace industry has in the country.

In 2016, Bombardier took a $1 billion bailout from the Quebec government after delays and slow sales associated with the C Series program pushed the company onto shaky financial ground.

Here is Boeing's entire statement to Business Insider:

"Boeing’s petition to the International Trade Commission seeks to restore a level playing field in the U.S. single-aisle airplane market. Boeing had to take action as subsidized competition has hurt us now and will continue to hurt us for years to come, and we could not stand by given this clear case of illegal dumping. Boeing is utilizing longstanding, transparent legal procedures that have been law for decades. This is the normal course of action for addressing instances where a competitor is selling into the U.S. market below cost, and we will let the process play out. Boeing welcomes competition and Bombardier can sell its aircraft anywhere in the world. But sales must be made according to globally-accepted trade rules. Any claimed economic threat to Bombardier relating to our ITC case can be attributed to that company’s decision to flout U.S. trade rules. We believe that global trade only works if everyone abides by the same rules of the road, and that’s a principle that ultimately creates the greatest value for Canada, the United Kingdom, the United States, and our aerospace industry."

SEE ALSO: I flew on a $20 million Embraer Legacy 500 private jet and understand why Jackie Chan bought one

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NOW WATCH: THE BOTTOM LINE: A lot of talk of a bitcoin bubble and a few good reasons to believe tech isn't one

BLOOMBERG: 'I cannot for the life of me understand why the market keeps going up'

Business Insider, 1/1/0001 12:00 AM PST

FILE PHOTO: Former New York City Mayor Michael Bloomberg addresses the audience next to billionaire Carlos Slim (not pictured) during a forum in Mexico City, Mexico December 1, 2016. REUTERS/Carlos Jasso/File photo

Stocks keep climbing and climbing, but Michael Bloomberg isn't sure why.

"I cannot for the life of me understand why the market keeps going up," the former New York City mayor said in an interview with CBS News' Anthony Mason.

"Our economy has some real challenges: the infrastructure's falling apart; we're destroying jobs with technology; we are keeping the best and the brightest around the world from coming to America to create new jobs, new businesses," he continued.

"All of those things would give you cause to worry about the future."

Stocks have been in an upwards trajectory for years, and, a week ago Monday, the S&P 500's bull run became the second-best performing since World War II. The benchmark index has climbed about 270% from its March 2009 low, according to data from LPL Financial.

In the interview, Bloomberg questioned why stocks continue to rise as genuine problems plague the US economy. However, what Bloomberg is missing is that the stock market does not necessarily represent the economy, as many companies that make up the stock market do business overseas.

In fact, throughout the stock market's recent ascent to new highs, experts have largely looked past middling economic data and attributed the gains to strong corporate earnings growth.

Which brings us to a chart shared by Deutsche Bank's Torsten Sløk back in 2015, showing two pie charts capturing a significant difference between US stocks and the US economy. One chart shows the share of US employment in service industries versus manufacturing industries, while the second shows the share of earnings in the S&P coming from services industries versus manufacturing.

"A key difference between the S&P500 and GDP is that most of the earnings in the S&P500 come from the manufacturing/energy/goods producing sectors but those sectors make up only 14% of total employment in the US economy," Sløk wrote at the time.

Although the data is from 2015, the point they illustrate is still relevant:

stock market economy

SEE ALSO: Here's what North Korea trades with the world

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NOW WATCH: Bitcoin's bubble swells with a new record high

Here's a super-quick guide to what traders are talking about right now

Business Insider, 1/1/0001 12:00 AM PST

janet yellen traders

Dave Lutz, head of ETFs at JonesTrading, has an overview of today's markets.

Here's Lutz:

Morning, and Happy Fed day!  We get the Announcement and Dots at 2pm, and the Yellen Presser at 2:30.  Thoughts with those impacted by the quake in Mexico – looks terrible down there.   We are seeing some haven action early, Gold, Treasuries, Yen and Swissie all bid.  Retail starting on back foot with BBBY down 13%, while FDX numbers hit the stock for 1%.  Pretty mixed markets in Europe, where the DAX is off small – the biggest losses in the food and beverage sector as Diageo gets hit while Fins under pressure as EU expands supervision of Banks and Insurers.   Spain is getting hit for 70bp as Catalan ministers are arrested.  FTSE adding small despite a rip higher in Sterling, as Strong retail sales boost the Discretionary stocks.   In Asia, Nikkei up small despite Sony hit on multiple downgrades as Softbank jumped - Hang Seng and Shanghai up 30bp as Electric Carmakers ripped - KOSPI hit for 20bp and Aussie lost small

The US 10YY off small as stops send it below the 100d, while Fed Funds at 58% for December, up from the 30’s last week.  DXY under pressure as Sterling leapt over $1.36 on retail sales before reversing – Euro busting upside $1.20, and Kiwi$ on 6week highs on election polls.  The Renminbi weakened again, down 2% in 2 weeks.   Ore lost 1%, bringing 4day losses to 10% and 2month lows – but other metals acting well led by Nickel up 2.5%.  WTI adding 1.2% into Expiry as API showed a Lower build than expected and Cat-4 Maria makes landfall in Puerto Rico.  Natty is consolidating the week’s gains still, but holding upside 200d.   Softs are all enjoying the tailwinds of the falling Dollar.

SEE ALSO: 10 things you need to know about the markets today

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NOW WATCH: Bitcoin's bubble swells with a new record high

Trump’s attempt to rewrite NAFTA pushes a provision that is 'senseless — and unnecessary'

Business Insider, 1/1/0001 12:00 AM PST

Trudeau Trump

Donald Trump campaigned for president on the premise that he would rip up US trade deals including the North America Free Trade Agreement with Mexico and Canada, which he has dubbed "the worst trade deal ever made."

While he was quick to renege on the Trans-Pacific Partnership Agreement with 11 Pacific-Rim nations that President Barack Obama and US trade negotiators spent several years working out, Trump was more daunted by the long-standing NAFTA. Rather than pull out, as he had promised, Trump has decided to renegotiate its terms, although the details of such renegotiations had until recently remained unclear. 

Now there’s some semblance of a plan on NAFTA and it includes a provision that has never been used in past US trade deals, and for good reason, according to Jeffrey Schott, senior fellow at the Peterson Institute for International Economics (where I used to work) and a veteran trade economist and former negotiator.

The Trump administration said last week it wants NAFTA revisions to include a so-called "sunset provision" that would terminate the pact after five years unless all three countries actively approve its renewal. 

"Sunset clauses have never been included in US trade agreements for the simple reason that they undercut the basic economic benefits of the deal," Schott writes in a new blog post.

"Such a clause would insert a fixed expiration date for NAFTA and require positive and politically fraught decisions to maintain tariff-free access to the three markets."

The increased uncertainty over the future of regional trade relations, coupled with the threat of import restrictions, would "discourage investment and dampen growth prospects in all three countries," Schott says. "The Trump administration’s sunset proposal is senseless — and unnecessary."

SEE ALSO: Trump's trade threats are based on a deep misunderstanding of the US-China economic relationship

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NOW WATCH: Bitcoin's bubble swells with a new record high

The Fed risks repeating a ghastly mistake it made right before the past 2 recessions

Business Insider, 1/1/0001 12:00 AM PST

yellen greenspan bernanke volcker

A decade ago this week, traders cheered news that the Federal Reserve was cutting its key interest rate by an assertive 50 basis points. Back then, the central bank was getting more worried about how borrowing costs could speed up the collapse in house prices.

The tenor of the two-day meeting this week is very different, as the Fed discusses an economy headed in the opposite direction. The Fed is now considering when to resume raising rates.

"One thing that concerns me more than anything is the Fed getting too aggressive in raising rates," said Bob Landry, the chief investment officer at USAA, where he manages $22.3 billion in assets. "If rates spike up too quickly and they end up inverting the yield curve, that's a classic recession signal."

The yield curve, which plots Treasury yields of various maturities, has already flattened as traders expected the US economy to trudge along at an unspectacular pace of about 2% to 3%. But it hasn't yet inverted — a situation in which long-term bond yields are lower than shorter rates, implying that investors see trouble in the short term and would rather invest in longer-dated bonds.

The Fed on Wednesday is expected to announce its next big move that will work with rate hikes: the shrinking of its $4.5 trillion balance sheet. According to the plan, it would no longer reinvest $4 billion of the mortgages and $6 billion of the Treasurys it bought after the financial crisis. It plans to raise these amounts every quarter until they hit $20 billion a month in mortgages and $30 billion in Treasurys.

It has never done this before, and so it's tough to know how exactly this will affect financial markets or the economy. There's a much greater precedent for interest-rate hikes.

To their credit, Fed officials have said they plan to make the balance-sheet unwind boring, as uneventful as watching paint dry, according to the Philadelphia Fed president, Patrick Harker. But even after the bond-market tantrum the Fed caused in 2013 when it first announced it was reducing its bond purchases, there's a risk that the Fed has not perfected how not to scare markets.

"They inverted the yield curve ahead of the last two recessions," Landry said. "They always find an excuse as to why it's different this time, but it hasn't been. So that's the one thing that makes me nervous — a more aggressive Fed than the Street is expecting — and that's when trouble could potentially begin."

SEE ALSO: Small investors have never been this bullish

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An investing legend who's nailed the bull market at every turn shares the hidden secret of future stock gains

Business Insider, 1/1/0001 12:00 AM PST

Laszlo Birinyi

It's conventional stock market wisdom that when investors run out of fresh cash to deploy, the end of a rally is near.

Luckily, we're nowhere near that extreme scenario.

As Goldman Sachs pointed out in a recent research note, the current cash position of 3.2% for mutual funds is "normal," showing that "skepticism abounds." In other words, the stock market lacks the type of overexuberant sentiment that can leave it vulnerable.

Legendary investor Laszlo Birinyi — who has nailed the eight-year bull market at every turn — wholeheartedly agrees. In his view, the high level of cash still sitting on the sidelines is one of the most underappreciated elements of stock bullishness. Sure, strong earnings growth is great, but it's futile if there isn't ample money to invest.

In an interview with Business Insider, the president of Birinyi Associates discussed his thoughts on cash levels, while also covering such hot-button market topics as volatility, equity valuations, exchange-traded funds, and the effect of politics on the market.

Here's what Birinyi had to say (emphasis added):

"I don't think people appreciate how much cash there is in today's market. It seems like everything is just an excuse to put that cash to work, whether it's a tax bill or economics or [President Donald Trump's chief economic adviser Gary] Cohn not leaving the White House — those are all just excuses. The bond market is unsettled, and you've removed some of the stock market concerns of the last couple years, most notably earnings. People are feeling a little more confident and willing to invest, and they have the cash to do it.

"The other issue is that while the averages are lackluster, there's a lot of trading money focused on individual stocks. The S&P may not have moved 1% or 2% in however many days, but the reality is that stocks are having really good days. You have a lot of individual stock volatility, which reflects the fact that people have the funds and they're looking for vehicles in which to manifest those funds. They're using single stocks as the vehicles, not broad asset classes such as emerging markets or gold or commodities. The critical ingredient in the market is cash."

SEE ALSO: An investing legend who's nailed the bull market at every turn sees no end in sight for the 269% rally

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NOW WATCH: Bitcoin's bubble swells with a new record high

Optimizing SegWit: How Bitcoin's New Software Is Giving Scaling a Boost

CoinDesk, 1/1/0001 12:00 AM PST

Bitcoin Core's latest software includes optimizations designed to boost SegWit, a scaling upgrade that's still slowly rolling out across the network.

DEUTSCHE BANK: Italy's 3 big problems could trigger the next financial crisis — and bring the euro down with it

Business Insider, 1/1/0001 12:00 AM PST

Roman helmet

  • Deutsche Bank's annual Long-Term Asset Return Study focuses in 2017 on the potential cause of the next global financial crisis.
  • Candidates include a Chinese slowdown, Brexit, and an excessively fast unwinding of the ultra loose central bank policy that has characterised the post-crisis years.
  • Italy, however, also poses a threat, according to strategist Jim Reid and his team.
  • The country faces a populist rising, a huge debt burden, a weak banking system, and a generally weak economy.

LONDON — In the months after Britain voted to leave the European Union last summer, some were concerned that a wave of anti-EU sentiment would build in other countries and cause the collapse of the block.

Nowhere was that more true than in Italy.

The country rejected a referendum on constitutional reforms that was widely seen as a vote against the establishment, and led to the resignation of Mario Renzi, one of the country's longest serving prime ministers in recent decades.

Those fears diminished after Renzi was swiftly replaced by a new technocratic government under former foreign minister, Paolo Gentiloni, and the rise of the Five Star Movement — a populist anti-EU movement seemingly slowed.

Now, however, Italy's problems — both political and economic — are rearing their heads once again, and could be the trigger of the next major financial crisis, according to research from Deutsche Bank.

A new research report from the bank compiled by a team led by famed strategist Jim Reid examines all the possible global events that could be catalysts for a new financial crisis, if and when one arrives.

Events and issues that could trigger that crisis include an excessively fast unwinding of the ultra-loose central bank policy that has characterised the post-crisis years, a crisis in China, and the failure of Japan — the world's third largest economy — to grow with any real strength.

Italy's inclusion, however, is an interesting one, with its problems neatly summed up by Reid and his team in their analysis.

Italy is, they said: "A country nearing an election and with high populist party support, with a generationally underperforming economy, a comparatively huge debt burden, and a fragile banking system which continues to have to deal with legacy toxic debt holdings ticks a number of boxes to us for the ingredients of a potential next financial crisis."

Those three problems could, if badly managed, end up causing catastrophic harm to not only Italy, but also the wider eurozone. 

"We can assume that if Italy does create a crisis it will likely risk triggering an existential crisis for the economic area as a whole," the team said, having argued that Italy is "perhaps the first line of defense" to any break up of the eurozone.

The 3 problems facing Italy

Leader of the Five Star Movement and comedian Beppe Grillo gestures while speaking during an election campaign for the European Parliament in Rome May 23, 2014. The words in the background read

Looking at the three political and economic problems, the most obvious to consider is the threat of a populist government under the Five Star Movement and its leader Beppe Grillo — a comedian turned activist.

Italy must hold an election by 2018, and while a majority government is highly unlikely for any party given that none is currently polling more than 27%, there are a number of coalition scenarios that could have an adverse impact on the markets.

The waters are further muddied by the possibility of electoral reforms that have the potential to change the way any election turns out.

Here are Reid and his team once more (emphasis ours):

"An electoral system that would require a large coalition would be seen as positive by markets as it would likely penalise the 5SM. However this brings into question the counter-productivity of a muddle-through strategy.

"As our economists have previously noted, a heterogeneous, ineffectual government would struggle to boost the too low potential GDP growth and a continuation of Italy’s deeply unsatisfactory economic performance would ultimately benefit Eurosceptic and populist parties. With that in mind, the longer Italy remains in a muddle-through, the greater the likelihood that Eurosceptic parties could gain an ample majority in the Italian parliament."

Italy's second major issue is its economy. Since the financial crisis, Italy has not been able to create sustainable strong growth, and has seen its debt pile grow to the second highest of any eurozone country, behind only Greece.

Debt to GDP stands at 133%, with only Greece, Japan, and Lebanon having higher ratios globally. Add to that a deficit of 2.4% of total, and Italy must spend a substantial amount of its money paying off interest on its debt obligations, as the chart below illustrates:Screen Shot 2017 09 20 at 09.08.08That said, all of these numbers have "stayed relatively constant in recent years" Deutsche Bank noted, with the European Central Bank's aggressive quantitative easing programme providing substantial assistance.

Now, however, the ECB is looking to slowly wind up its QE, with the central bank widely expected to taper its bond purchases from €60 billion per month to just €40 billion a month within its next couple of meetings.

"The question we find ourselves asking however is what happens when the ECB slows down the rate of purchases, bond markets start to reverse, and the cost of financing this debt load rises?" — they asked.

"Growing out of this debt burden would in theory be the most logical explanation, but evidence of Italy’s post Euro adoption experience (see Figure 47) suggests this will be extremely hard."

Figure 47 can be seen below:

Screen Shot 2017 09 20 at 09.08.15

If the possibility of a populist, eurosceptic government and a huge debt burden that is likely to increase aren't enough to scare the markets, the issues in the country's banking system might.

"The issue with economic growth is that growth requires a healthy banking system. Italy’s domestic banks have suffered greatly over the last few years having been poorly managed and riddled by stories of fraud and scandal."

"However the headlines have been mostly dominated by the huge stock of NPLs which exist on the domestic banks’ balance sheets." An NPL is a non-performing loan, where the borrower is late with repayments. 

The country's financial sector is plagued by so many bad loans that the government was, last April, forced into rallying bank executives, insurers and investors to put €5 billion (£4.2 billion, $5.57 billion) behind a rescue fund for its weakest banks. The Atlante fund is designed to buy so-called bad loans from lenders and invest in their shares in the hope that the re-energized banks will lend more to businesses and spur growth.

"Our banking analysts estimate that Italian banks still have €349bn of gross NPLs. Unsurprisingly ‘significant’ banks (those directly supervised by the ECB),hold the majority of these NPLs at around €267bn," Reid and his team note.

So far the fund has helped to rescue the world's oldest bank, Monte dei Paschi di Siena from collapse, as well as providing funds for several smaller Italian lenders, but problems in the sector persist.

Banks are also, as might be expected, highly exposed to Italian government debt. If, as previously mentioned, the bond markets start to turn, things could get nasty, as Italian banks hold around 20% of all BTPs (Italian government bonds with more than a year's duration), Deutsche's analysis suggests.

"Since QE started this has been a prudent move for banks, but what happens when the tide turns and the inevitable sell-off starts. It’s another factor to consider. If there are ever any doubts about the Government’s willingness or ability to pay, the banks will be seriously exposed to a financial crisis," Reid and team said.

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UK retail sales jump as shoppers ignore Brexit-driven price increases

Business Insider, 1/1/0001 12:00 AM PST

A man carries a shopping basket in an Asda store in northwest London, Britain August 18, 2015. Sales at Wal-Mart's British supermarket Asda fell for a fourth straight quarter on Tuesday, down 4.7 percent to confirm its position as the weakest performer in a sector hammered by the growth of discount retailers.

LONDON — Retail sales in the UK jumped during the month of August.

Brits continued to spend strongly on non-essential items, looking beyond the price increases brought about by the pound's post-referendum slump, new data from the ONS shows.

Sales grew by 2.4% on a year-on-year basis, the ONS said, up from just 1.4% in July, and even further ahead of the 1.1% growth that had been forecast by economists polled prior to the release.

On a month-to-month basis, growth was 1%, compared to an expected 0.2%, the data showed.

"Within this month’s retail sales we are seeing strong price increases across all store types compared with a year ago, reflecting wider inflationary pressures," Kate Davies, a senior statistician at the ONS, said.

"However, we are still seeing underlying growth in sales volumes, and with strong growth in non-essential purchases as consumers continued to buy more from non-food stores.”

On a three-monthly basis, the volume bought increased 1.2%.

Three-month retail sales movements are generally seen as more reliable than a single month's data, which can be volatile, as June's big jump shows.

Here's the chart showing the overall retail sales trend:Screen Shot 2017 09 20 at 09.33.54

And here is the ONS' breakdown of the types of shopping that drove the increased overall retail sales:

Screen Shot 2017 09 20 at 09.39.31

Prices in British shops continued to rise in August, the ONS said, reflecting the wider increase in overall inflation over the last year as the depreciation of the value of the pound seen since the vote. That fall has pushed up the price of imports, which then filters into consumer products.

"Consistent with the Consumer Prices Index (CPI), rising prices in clothing stores and petrol stations provided the main contribution to store price inflation, with average prices in petrol stations increasing by 5.0% and in textile, clothing and footwear stores increasing by 4.2%," the ONS' statistical bulletin said.

"Despite the price increases in clothing stores, likely to be as a result of sales promotions ending, consumers continued to buy more from these stores and feedback from businesses suggests that footwear stores fared well with back-to-school items this August."

The pound jumped on the news of the data, climbing by around 0.5% against the dollar, as strong price rises in the shops add to the data supporting a hike in interest rates from the Bank of England. Here's the chart:

Screen Shot 2017 09 20 at 09.52.45

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NOW WATCH: Shiller says bitcoin is the best example of a bubble in the market today

Bitcoin's Parimutuel Problem (Or Why Shorting Doesn't Pay Today)

CoinDesk, 1/1/0001 12:00 AM PST

Parimutuel betting pools in the cryptocurrency grant traders short exposure, but there are plenty of limitations to this new type of exchange.

10 things you need to know before European markets open

Business Insider, 1/1/0001 12:00 AM PST

john kelly trump UN

Good morning! Here's what you need to know.

1. Ray Dalio, the founder of the world's largest hedge fund, said bitcoin, the red-hot cryptocurrency, is in a bubble.  While speaking on CNBC's Squawk Box Tuesday, the billionaire co-CIO of Bridgewater Associates said "bitcoin is a highly speculative market."

2. The value of Norway's sovereign wealth fund officially hit $1 trillion early on Tuesday after outperforming all initial expectations, its manager said in a statement. "I don't think anyone expected the fund to ever reach $1 trillion when the first transfer of oil revenue was made in May 1996," said Chief Executive Officer Yngve Slyngstad of Norges Bank Investment Management, which operates the fund.

3. The US judge overseeing Toys 'R' Us approved the company's request to borrow more than $2 billion to help stabilize itself to build inventory for the year-end shopping season. Toys 'R' Us filed for bankruptcy Monday, squeezed by online shopping and discount chains.

4. Japan's Nikkei share average was nearly flat on Wednesday morning after scaling more than two-year highs on the previous day. The Nikkei was flat at 20,302.96 in midmorning trade, after surging 2% to hit the highest level since August 2015 on Tuesday supported by a weaker yen and hopes for a snap election.

5. Shares of Tesla fell from record highs after an analyst warned that the electric car maker may take longer than expected to become profitable. Jefferies analyst Philippe Houchois launched coverage of Tesla with an "underperform" rating, helping send shares of the company down 2% to $376.74.

6. German drugs maker Bayer said it would likely take until early next year to complete the planned $66 billion takeover of US seeds group Monsanto. The European Commission has been scrutinising the takeover with a deadline of Jan. 8. Bayer said in a statement it had asked the regulator for an extension to Jan. 22.

7. US wireless carriers T-Mobile US and Sprint are said to be in active merger talks, CNBC reported, citing sources. CNBC reported that the companies are still weeks away from finalizing a deal and believe the chances of reaching that deal are not assured. 

8. Saudi Aramco will be able to release its audited financial accounts in early 2018 if the government decides on a venue for listing the oil giant's IPO, Reuters reported. It will be the first public earnings disclosure for Aramco and one of the most important internal milestones in preparing for the initial public offering, which is expected to raise as much as $100 billion.

9. Toyota President Akio Toyoda said his company would continue to make a variety of vehicle types even as competitors develop more electric vehicles. "EVs (electric vehicles) are in focus at the moment but customers and the market will ultimately decide which powertrains will be successful," he said.

10. Amazon is working on its first wearable device – a pair of 'smart glasses', the Financial Times reported on Wednesday. The device, designed like a regular pair of spectacles, will allow Amazon's digital assistant Alexa to be summoned anytime at all places, the report said, citing people familiar with the plans. 

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One chart shows the European fintech investment boom: But there may soon be "more supply than is comfortable"

Business Insider, 1/1/0001 12:00 AM PST

Screen Shot 2017 09 18 at 16.34.30

LONDON – More than $8 billion has been invested in European fintech companies since 2010, and recent years have seen funding rounds climb into the tens of millions while big corporates have grown increasingly interested in the sector.

But the rapid accumulation of capital investment could pose problems in the next few years, when investors start looking to sell. According to a new report by Innovate Finance and Magister Advisors on the state of European fintech, "the pressure to look for exits will inevitably intensify over the next five years."

The report found that deal sizes have been on an upward trajectory since 2012, with a particular increase in the number of $20 million+ funding rounds. In 2017 so far, $2 billion-worth of capital has already been invested across 43 deals — an indicator, according to the report, that the fintech sector is maturing.

Corporate investors have taken a particular interest in larger rounds, and in 2017, 44% of the $20 million+ rounds involved at least one corporate or CVC.

Here's that chart:

Screen Shot 2017 09 18 at 16.20.49

Unlike in more traditional sectors, valuations are increasingly based ahead of fintech companies' performances, with investors buying into potential growth rather than historic or current results.

However, according to Founder of Magister Advisors Victor Basta, "these companies need time to grow into their valuations" before they can be sold. Since the natural venture capital fund "clock" in this sector is about eight or nine years, there may come a time in five years or so when there is "more supply than is comfortable," he says.

It is also worth noting, he says, that many fintech and insurtech companies take longer to build than other startups, in part because they interact with large banks and institutions that generally move very slowly. Some investors may start feeling the pressure to sell in the next five years, particularly if they have not have factored in this longer time required to produce a good return on an investment.

Screen Shot 2017 09 18 at 16.28.06

Although the growing interest in fintechs from big corporate investors can a great boost to capital, startups may be concerned about investors' level of influence, and seek to avoid tailoring products and services too heavily to their preferences. However, building a strong relationship with a major corporate investor can be a good exit strategy for fintech CEOs, if they plan to sell rather than continue to grow the business themselves.

Victor Basta, founder of Magiser Advisors.The report also found that bigger fintech companies have begun acquiring smaller companies, and diversified to move beyond payments: PayPal acquired both Xoom (which deals with remittances) and Braintree (which handles merchant payments), while Square acquired Main Line Delivery, Caviar and Fastbite in order to enter the meal delivery market.

At the same time, fintech companies like Zopa have sought banking licenses in order to grow, rather than build whole new products.

Meanwhile, global financial institutions are committing both cash and other resources to the fintech sector, with Barclays opening an innovation centre in London and BNP Parabis co-founding an accelerator for fintech and insurtech. According to the report, more than half of the top 100 global banks have now partnered with at least one fintech company.

The range of investors in European fintech has also been diversifying: the report found that some of the most active corporate investors in European fintech, such as Tengelmann, Intel Capital and Salesforce.com, have core businesses outside of financial services. Players in the European fintech space have also diversified to include Asian investors. 

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These factory-made homes the size of a London Underground carriage could help fix London's housing crisis

Business Insider, 1/1/0001 12:00 AM PST

Exterior photo of Pocket's Sail Street SE11 development

LONDON — A once-popular trend is back in fashion: modular homes.

Once known as "prefabs," these apartments represent a radical departure from conventional brick-and-mortar building.

Each apartment is constructed in a UK factory, shipped to site by lorry, then assembled in around twenty weeks — less than half the time it takes to build a traditional development.

Modular homes are not new in the UK. They had a heyday in the 1960s but fell out of favour, with a reputation for poor build quality and ugliness. Now, just 2,000 are built each year in the capital.

But offsite manufacturing has come on a long way since then, and the Greater London Authority — which has oversight for land planning — thinks it could be a solution to London's housing crisis. A report in August touted modular homes as a "way to close the gap" between supply and demand in the capital.

The report's author Nicky Gayron said modular homes had important benefits over traditional ones.

"These buildings are high quality and outstanding in terms of performance," she said.

"Their construction is more environmentally-friendly than traditional construction methods and they are a far cry from their prefabricated predecessors."

Innovative solutions are badly needed. The GLA estimates that London needs 50,000 homes built a year just to sustain population growth, less than half of what's currently built. But are modular homes the answer?

Pocket Living

Housing developer Pocket Living is leading the modular charge, having recently secured a £150 million loan from the London Mayor's office, the government, and Lloyds bank to provide 1,000 London homes by 2021.

To their cheerleaders, modular apartments Pocket's — which currently account for about 35% of the firm's construction output — could be an important fix for a London market marred by decades of runaway price growth. To qualify to buy a Pocket home, owners must be first-time buyers, earn less than £90,000, and already work or live in the same borough.

Low construction costs and their small size mean they are classed as "affordable," too, capped at 80% of the average market price in a given borough.

Living room in Pocket's Sail Street SE11 developmentTo their detractors, so-called "micro-homes" are the last thing London needs. Writing in the Guardian last week, sociologist Lisa Mckenzie said Pocket Homes were unaffordable for most, as a price tag of £350,000 to £400,000 means a person would need that £90,000 income just to secure a mortgage.

Pocket's sales director Lucian Smithers says this is not the case. He says the average income of a Pocket owner is £42,000 — slightly above the London average and the average buyer age a relatively low 32.

"We didn't get into business to sell to people who are earning £85,000 a year," he said.

"It's a combination of what consumers want, and can afford, along with the protections that belong to the affordable housing sector," he told Business Insider.

And what about their size? One-bedroom apartments measure just 38 square metres, roughly the size of a London tube carriage. Do people really want to live in a space that size?

The answer appears to be a resounding yes: 35,000 Londoners are currently on the waiting list for a Pocket home.

Smithers said the debate around space is familiar. "A lot of the demand for smaller housing is looked at as historical shrinkage of household sales, and the implication is a fall in quality: a fall in quality of product and quality of life," he said.

"But a few things are left out of that debate. The drive towards the city as a cultural and business hub has increased since the millenium. With that has come a big shift in the way 20- and 30-somethings live.

"They're more transient, and typically live in very insecure, expensive rental accommodation. They are children of the internet. They have everything in the cloud. They read books on the Kindle and their music is stored on their laptops.

"They want to be proximate to the cultural hubs of the city, and they want to live in the city: Not have a garden, a large balcony, or a flat that drains their lifestyle in cost," he said.

"The debate around space is a very difficult one and it's very fraught, but I hope we can have a more nuanced debate around space and the benefits of allowing one-person households to form," he says.

The main advantage of modular construction, Smithers says, is the speed of on-site construction.

"There aren't many small- and medium-sized developers out there, and getting your capital out so you can recycle it as quickly as possible is critical," he says.

"Shaving a third off construction time is incredibly useful."

He has an interesting theory as to why the government is so interested in modular housing.

"It's well-documented that [post-Brexit labour shortages] are a major concern," he said.

"The government's very interested in modular housing because it can spread the load in terms of bringing in factories outside the south-east of England to ones that are in the Midlands and the North."

In theory, spreading labour outside the south-east — where the majority of construction workers are European — could reduce the impact of labour shortages.

But Smithers warns that may not solve the problem. "Our experience is that labour in the factories [outside the south-east] is still predominantly European," he says.

Unlocking London's airspace

Another developer making inroads in the modular sector is Apex Housing. Its business model is rather startling: it builds homes on top of existing ones. Ideally, the roof of the existing building is flat, but pitched roofs aren't a problem either.

Apex simply removes the pitched roof, installs an extra layer of housing, and puts the roof back on.

Val Bagnall, Apex's business development director, told Business Insider that the firm has identified £54 billion of development potential on London's roofs, both on top of retail spaces and privately owned residential buildings.

Business Insider sat down with Val Bagnall, Apex's business development director, at property conference Resi Conf last week.

"People are still unaware of the value that sits above them," he said. "We're trying to unlock the market."

Apex's pitch to the freeholder is roughly the same as a conventional development: the firm offers around 25% or 30% of the total sales value of the resulting units.

It is also in talks with Tesco to develop on the flat roofs of the supermarket's buildings. Bagnall believes Tesco's London roofs alone could have £400 million of development potential.

Apex has built only built two single units to date, but earlier this year signed a deal to build 28 flats above a building in Southwark, 11 of which will be "affordable." Watch this space.

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Here's why the crackdown on bitcoin in China is 'not a real problem' for the digital currency

Business Insider, 1/1/0001 12:00 AM PST

  • Capture.PNGCryptocurrency investors are shaking off reports of a regulatory crackdown on bitcoin in China.
  • That's because traders view recent news and rumors as peripheral to the digital coin's future success and potentially temporary.

NEW YORK — The cryptocurrency market appears to be unconcerned about a Chinese crackdown on bitcoin, the largest digital coin by market cap.

On Thursday reports that Chinese regulators would force bitcoin exchanges to shut by the end of September triggered a sell-off of nearly $1,000, bringing the price of the coin below $3,000 for the first time in over a month. Within a couple hours, however, bitcoin recouped most of those losses.

Since then, some of China's largest cryptocurrency exchanges, including OKCoin and Huobi, have announced they will voluntarily halt trading between bitcoin and yuan and reports of further government intervention have emerged.

Still, bitcoin has nudged up near .72% over the past week, as traders brush off recent headlines as peripheral to the future of the digital coin.

Josh Olszwicz, a bitcoin trader, told Business Insider the markets are ignoring news out of China because it has zero impact on the coin's actual technology.

"If it doesn't affect the protocol, then it's not a real problem," he told Business Insider."The bitcoin cash shakeup was much more worrisome from my perspective, but even then the core bitcoin protocol remained unaffected."

On August 1, bitcoin forked into two different cryptocurrencies: bitcoin and bitcoin cash.

"Countries can try and ban bitcoin all they want, but people will still use it if they need and want to - the protocol doesn't need government acceptance."

Sebastian Quinn-Watson, of Blockchain Global, a bitcoin exchange operator, said the crackdown is just a temporary reaction to the explosive growth of the cryptocurrency market this year. Initial coin offerings, a fundraising method in which companies can issue their own cryptocurrencies to raise millions of dollars, alarmed regulators and forced them to take action to reign in the markets to prevent a possible crash. On September 4 regulators deemed ICOs, which have raised over $2 billion this year, illegal.

"By stepping in so dramatically and not allowing what would have been an almost inevitable crash in the crypto market, the regulators acted to ensure that investors did not irrevocably lose trust," he said.

Quinn-Watson, who speaks frequently with regulators through his position at Blockchain Global, said he expects the regulatory pendulum to swing the other way eventually. Here's Quinn-Watson (emphasis added):

"We do not see this halt as being long term. Innovation is a significant pillar of China's economic growth plan.  Fintech as a subset of innovation is a very important part of this pillar. Blockchain is an important part of this mix. The PBOC has teams of developers building out use cases for blockchain."

He thinks regulators will ultimately allow companies to run ICOs through a government-supervised pilot program.

Still, not everyone agrees with Quinn-Watson. Jim Stent, author of "China's Banking Transformation" said China's crackdown is permanent, according to reporting by CNBC.

"I see the crackdown on bitcoin as part of this larger multi-agency program to reduce financial sector risk, which will unfold over months and probably years," Stent said."I do not see risk reduction as something temporary, nor do I see the bitcoin crackdown as temporary."

China's not as important as it once was

The decline of Chinese dominance over the cryptocurrency market could also be playing into the muted reaction by the markets about recent regulatory news. According to data from CoinDesk, the cryptocurrency news site, bitcoin trading against the Chinese yuan dropped off from a near 90% at the end of 2016 to around 10% to 20% for much of 2017.

Capture.PNG

 "Many traders felt that China is becoming less of a market leader for bitcoin trading," Greg Dwyer, head of business development at BitMEX, a bitcoin mercantile exchange, told Business Insider.

Dwyer said the market is strong, pointing to a recent milestone hit by the firm as proof.

"BitMEX, traded over $1 billion in notional in one day (was actually $1.1 billion) last Friday," he said. "We are the first bitcoin exchange to ever have hit this milestone and represents the fact that there is an enormous interest in the trading of bitcoin."

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NOW WATCH: TECH ANALYST: There's one business driving Apple's growth, and it's not the iPhone

UK small business confidence 'plummets' to its lowest level since the Brexit vote

Business Insider, 1/1/0001 12:00 AM PST

Theresa May

LONDON — Optimism among small UK firms has dropped to its lowest level since the aftermath of the EU referendum.

The Federation of Small Businesses' Small Business Index for the third quarter of 2017 dropped to +1 from +15 in Q2, close to the -3 seen immediately after last June's Brexit vote.

FSB chairman Mike Cherry said rising inflation and a slowing economy were mainly responsible.

"Rising inflationary pressure and a weakening domestic economy are the twin drivers of plummeting confidence among small firms and consumers alike," he said.

Small businesses most frequently identified the domestic economy (63%) and consumer demand (35%) as barriers to growth. The retail and entertainment sector reported some of the lowest levels in confidence, sliding to -20% and -30% respectively.

The research was carried out in July and based on a July poll of 1,230 small businesses.

It also found 70% of firms reporting a rise in operating costs compared to the same period last year. Labour costs (42%), tax hikes (21%) and rent (19%) were given as the main causes of the increase.

There was some good news. British exporters — who stand to benefit from a drop in the pound — remain optimistic about their prospects. The proportion reporting an increase in overseas sales hit a three-year high (39%) and a similar proportion (35%) expect export growth to continue over the coming quarter.

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