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This week, $312 billion Bank of America (BoA) filed a patent to offer crypto custody, targeting large-scale institutional investors and retail traders. Some experts have said that the efforts of major financial institutions to create institutional products around cryptocurrencies will bolster the adoption of crypto in US markets, which will naturally lead to other publicly

The post Does Bank of America’s Crypto Custody Show Irrelevance of Bitcoin ETFs? appeared first on CCN

• Tesla is bringing its upcoming semi truck, the Semi, to some of its customers. One of those customers (UPS) complimented the vehicle.
• The Twitter account for UPS' Illinois branch posted videos of the Semi on Monday and said it offered a "smooth" ride. 
• The version of the Semi the company saw is likely a prototype. Tesla declined a request for comment.

Tesla is bringing its upcoming electric semi truck, the Semi, to some of its customers. One of those customers — UPS — recently complimented the vehicle.

The Twitter account for UPS' Illinois branch posted videos of the Semi on Monday and said it offered a "smooth" ride. 

Electrek reported on Friday that the Semi had arrived at the Arkansas headquarters of another customer, the trucking company JB Hunt. 

The version of the Semi each company saw is likely a prototype, though Tesla declined a request for comment. In addition to UPS and JB Hunt, customers for the Semi include Walmart, Pepsi, Anheuser-Busch, and FedEx.

Production for the Semi will start in 2019, Tesla has said. The company will have to expand the capacity of its assembly plant in Fremont, California, convert its battery-production factory in Nevada to produce vehicles, or use another company's factory to meet that timeline.

During the company's second-quarter earnings call in August, CEO Elon Musk said he was unable to answer questions about where the company will produce future vehicles. Tesla said it would take around two years for production to begin at a factory it will build in China.

Tesla says the Semi will have a range of 500 miles per charge, an innovative cabin design, and the ability to go from 0-60 mph in five seconds without any cargo and in 20 seconds while carrying 80,000 pounds of cargo. 

Some in the trucking industry have cast doubt on those numbers. In February, Martin Daum, the head of Daimler's truck and bus division, suggested to Bloomberg that the truck's range would defy the laws of physics.

When asked about Daum's evaluation during Tesla's first-quarter earnings call in May, Musk questioned Daum's knowledge of physics.

"He doesn't know much about physics. I know him. I'd be happy to engage in a physics discussion with him," Musk said.

SEE ALSO: Elon Musk says he didn't cry when he told The New York Times about his 'excruciating' year and lonely nights at the Tesla factory. The Times says his 'emotion was audible.'

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Stocks ended little changed Tuesday, after the S&P 500 touched 2,900 for first time, holding close to record highs for a third straight session. The dollar slipped, and Treasury yields inched higher. 

Here's the scoreboard:

Dow Jones industrial average: 26,060.62 +10.98 (+0.042%)

S&P 500: 2,897.60 +0.86 (-0.024%)

Nasdaq Composite: 8,030.04 +12.14 (+0.15%)

1. After agreeing to resolve key NAFTA disputes with Mexico, the US restarted high-level talks with Canada. US Trade Representative Robert E. Lighthizer was expected to meet with Canadian Foreign Minister Chrystia Freeland in Washington, a day after President Donald Trump threatened to terminate the 24-year-old agreement and to hit Canada with auto tariffs.

2. The US trade deficit in goods widened in July for the second straight month. The figure measuring trade in goods rose to $72.2 billion in July from $67.9 billion the month before, according to a preliminary report from the US Census Bureau. 
3. Consumer confidence in the US jumped to its highest level in nearly 18 years. The index rose to 133.4 in August from 127.9 the month before, the Conference Board said, easily beating economist expectations. 
4. Earnings season wraps up. Tiffany & Co reported second-quarter earnings that beat Wall Street estimates and raised its profit forecast. Best Buy, on the other hand, saw online sales growth drop and disappointed with third-quarter guidance.

And a look at the upcoming economic calendar:

• Consumer spending numbers and GDP revisions are out in the US.

SEE ALSO: Amazon has helped change the way retailers set their prices — here's how it'll affect everyone from shoppers to the Fed

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This article originally appeared on Bitcoin Magazine.

• An unverified Twitter account claiming to be Warren Buffett is raking in followers. 
• Kanye West posted a screenshot of one of the tweets Tuesday, drawing his 28.1 million followers' attention to the account. 
• Impersonation is against Twitter's terms of service.

Kanye West has drawn his 28.1 million followers' attention to a Twitter account claiming to be Berkshire Hathaway CEO Warren Buffett. 

On Tuesday, the rapper posted a screenshot of a tweet from the unverified and misspelled account of @warrenbuffet99. The tweet was a list of "lessons from children" that included laughing often and asking more questions — characteristic of the motivational tone that the Buffett imposter has taken with its 71 tweets. The account was temporarily restricted after West's tweet.

Buffett's real, verified account only has nine tweets.

The fake Buffett account had over 242,000 followers as of Tuesday afternoon, nearly six times as many as it had on Monday. The account was started in December 2016 but doesn't appear to have tweeted before Saturday.

West is one of the more prolific and controversial celebrities on Twitter. After he tweeted a photo of himself wearing a "Make America Great Again" hat, he got a response from President Donald Trump, who called him "my brother." But other celebrities distanced themselves from West and Trump.

See also:

• Warren Buffett disciple Scott Black explains why old-school value investing has gotten so difficult — and how he's managed to survive

• A group of investors with $16 trillion at stake is struggling to find success, and its survival is in jeopardy

• Investors have turned complacent and are in danger of being sideswiped by a 'likely correction' that's approaching, Morgan Stanley says

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• President Donald Trump doubled down on efforts to pressure Canada into concessions.
• Analysts see the threats as all talk and ultimately expect a trilateral NAFTA deal. 
• The approach mirrors those written about in The Art of the Deal, which other world leaders have increasingly caught on to. 

After agreeing to compromise with Mexico on key NAFTA issues Monday, President Donald Trump doubled down on efforts to pressure Canada into concessions.

He threatened to terminate the three-country accord entirely and impose tariffs on Canadian automobile imports if its neighbor did not join the two countries. He even claimed a new agreement would be called the "United States-Mexico Trade Deal."

Of course, many analysts predict that's all talk. Mexican President Enrique Peña Nieto immediately pushed back on comments excluding Canada, which was set to begin high-level meetings with the Trump administration in Washington a day later.

"Although the exact timing is uncertain, we expect the countries to ultimately reach a trilateral deal, avoiding the serious consequences that would have resulted from President Trump carrying out his threat to withdraw from NAFTA," a UBS report out Tuesday said. 

Trump's NAFTA approach was "straight from his Art of the Deal playbook," according to Paul Ashworth, chief US economist at Capital Economics. The 1987 book that Trump coauthored with Tony Schwartz brands successful negotiations as zero-sum games won by keeping others on their toes and maximizing leverage. 

Hugo Perezcano Diaz, former head of international trade for the Ministry of Economy in the Mexican government, told Business Insider in early August he thought a NAFTA deal could be reached in coming months — but games the president is known to play seemed to keep optimism at bay.  

"I don't think we're over [the possibility of] President Trump ultimately tweeting one morning that the US is withdrawing from NAFTA," Perezcano Diaz said at the time. 

The feeling isn't unique to NAFTA partners. Sowing confusion and uncertainty in attempt to gain leverage has been a cornerstone strategy Trump has turned to in the trade wars he has started with Europe, China, and other major business partners. 

But as Jonathan Swan of Axios reports, other world leaders have learned to use Trump's negotiating technique against him. That seems to especially be the case with China, which analysts note could have less to lose from tariffs than the US.

"The Chinese have absorbed this lesson the best," Swan said. "They have engaged in a trade war with no armistice in sight. ... China is fully prepared to retaliate and out-wait America."

In a July meeting in the Oval Office, a smiling French President Emmanuel Macron told Trump he wasn't planning to negotiate on recently imposed metal tariffs just yet. 

"I read the Art of the Deal," he said. "I know that we need to retaliate first so we have some leverage in the negotiation."

SEE ALSO: Trump's favorite trade measure got worse in the first full month of the trade war

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Morgan Stanley is urging its super-rich clients to pull out of one of the market's hottest corners, and it's a warning shot to the US economy

The consumer-discretionary sector is the stock market's best performer of the last decade — but now it's time to consider taking profits, says Morgan Stanley Wealth Management.

The sector's chart-topping performance on the S&P 500 is just one reason for the recommendation offered by Lisa Shalett, the head of investment and portfolio strategies, in a note on Monday.

Companies in the sector range from automakers to apparel makers and casinos, which make goods and services that consumers splurge on. Consumer spending contributes to more than two-thirds of the economy's growth.

And so, Shalett's sector call further makes the case that the backbone of the $20 trillion-plus US economy could be headed for a slowdown.

A $1.5 billion investment firm is taking a fresh approach to launching a crypto index

A $1.5 billion money manager is looking to unleash the crypto markets onto pension funds and endowments with a new kind of index aimed at institutional investors.

Morgan Creek, the investment firm led by Mark Yusko, on Tuesday announced an index called the Morgan Creek Bitwise Digital Asset Index in partnership with the California startup Bitwise Asset Management.

Crypto indexes have been popping up at a fast clip this year as crypto firms eye big institutional pockets. Elsewhere in the market, Bloomberg partnered with Mike Novogratz's Galaxy Digital on an index. Coinbase also announced the launch of a fund to allow investors to put money into a basket or index of four of the largest cryptocurrencies.

Google responds to Trump's claim that the company is 'suppressing the voices of conservatives and hiding information'

Google has responded to two tweets President Donald Trump sent early Tuesday accusing the company of intentionally "silencing the voices of conservatives and hiding information and news that is good" with its search results.

"Search is not used to set a political agenda, and we don't bias our results toward any political ideology," Google told Business Insider in a statement, adding that it prioritized relevancy and quality.

Trump, appearing to cite a figure from an unscientific study carried out by a conservative opinion blog, claimed that 96% of Google's search results of his name were "from National Left-Wing Media," calling it a "very serious situation" that "will be addressed." He did not explain how the government might act on the issue.

In markets news

• The stock market's record-breaking run is masking a dangerous trend brewing under the surface, Morgan Stanley says
• Amazon has helped change the way retailers set their prices — here's how it'll affect everyone from shoppers to the Fed

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This article originally appeared on Bitcoin Magazine.

This article originally appeared on Bitcoin Magazine.

This article originally appeared on Bitcoin Magazine.

Bitcoin Price continued to establish new intraday highs on Tuesday bouncing from this week’s bottom near $6,559. The BTC/USD pair was hinting a strong push towards 7000-fiat while being on a slow-and-steady upside trend. Since its infamous 30-minute crash, the pair has come a long way to establish a new monthly high at 7127-fiat. On … Continued

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• Snap shares were trading near 3-month lows on Tuesday. 
• Snap beat on both the top and bottom lines in the second quarter, but admitted its daily active users dropped.
• Watch Snap trade in real-time here.

Snap shares were trading at their lowest level since May 31 on Tuesday, touching an intraday low of $11.19 — just $0.67 above the record low set on May 17.

Earlier this month, the social-media company  reported a loss of $0.27 a share on revenue of $262 million in the second quarter. After adjusting for pre-tax gains, the loss per share was $0.14. Snap also said that its daily active users decreased 2% to 188 million in second quarter, its first-ever decline, comparing to 191 million in previous quarter. 

Tuesday's selling has shares on track to snap their mini two-day winning streak. The social-media company was able to post a gain of 1.5% on Friday — after Bloomberg profiled CEO Evan Spiegel said he was making an effort to be more personable with employees. 

"I remember thinking, Why would I go around the company and just chat with people?" he told Bloomberg. "Like that would be so awkward."

Snap shares were down 24% this year.

SEE ALSO: Snap CEO Evan Spiegel said he was taught to be seen, but not heard — which is why he can be so shy with his employees (SNAP)

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• Climate change is damaging the US economy's long-term growth prospects, according to a new study published by the Richmond Fed.
• "The consequences of higher temperatures on the US economy may be more widespread than previously thought," the report said. 
• US economic growth may be reduced by as much as one-third by 2100, the authors estimate.

Here’s another reason to urgently reduce humanity’s contribution to an overheating planet: It’s bad for the economy.

In a country where environmental concerns are often depicted as conflicting with business and economic growth prospects, new research from the Federal Reserve Bank of Richmond finds just the opposite.

"The consequences of higher temperatures on the US economy may be more widespread than previously thought," the report said. 

The authors — two Richmond Fed staffers and two academics — estimate rising temperatures could curtail the pace of US economic growth by as much as one-third by 2100. 

The study applies three scenarios of future greenhouse gas emissions determined by the Intergovernmental Panel on Climate Change.

Under the’ "low-emissions" scenario, rising temperatures would reduce growth in gross domestic product by 0.2 to 0.4 percentage point annually from 2070 through 2099, which represents as much as 10% of the historical average annual growth rate of 4%.

Under the high-emissions scenario, rising temperatures could reduce the growth rate by up to 1.2 percentage point, or roughly one-third of the historical average annual GDP growth rate. 

Economic forecasting is a perilous exercise even in the short run — and the authors duly note their estimates should be "interpreted with caution, since future adaptations to changing temperatures may mute long-run effects."

Still, they warn that "over a longer horizon, the impact on GDP growth rates may be substantial."

Looking across industries, the impact on productivity goes well beyond the obvious, like agriculture. "For example, temperatures above 90˚F have been found to reduce production at automobile manufacturing plants in the United States."

Even the insurance industry is adversely affected, and not just because of higher payouts for natural disasters. "High temperatures negatively affect health, resulting in increased hospitalizations …  As health outcomes worsen, insurers would face increased claims," the study says.

SEE ALSO: Trump’s climate skepticism could be the biggest threat to US national security

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This article originally appeared on Bitcoin Magazine.

A multi-billion dollar investment advisor has launched a new cryptocurrency index fund built specifically for institutional investors, and the assets that aren’t included in the fund will likely raise more eyebrows than those that are. Bitwise, Morgan Creek Create Crypto Index Fund for Institutions Announced on Tuesday, the Digital Asset Index Fund has been developed … Continued

The post This Cryptocurrency Index Fund is Targeting Institutions, and it Doesn’t Include XRP appeared first on CCN

• A 1962 Ferrari 250 GTO sold for a record price of $48.4 million dollars at an RM Sotheby's Auction in Monterey, California on Saturday. 
• The $48.4 million dollar price tag was the most a classic car has ever sold for at an auction.
• The car had been owned by Dr. Gregory Whitten, the Chairman of Numerix Software, car enthusiast, Ferrari connoisseur, and vintage racing driver.
• RM Sotheby's said the $48.4 million dollar auction price exceeds the previous record-breaking price by more than $10 million.  

  ---

A 1962 Ferrari 250 GTO sold for a record price of $48.4 million dollars at an RM Sotheby's Auction in Monterey, California on Saturday. 

The $48.4 million dollar price tag was the most a classic car has ever sold for at an auction. The 1962 Ferrari 250 GTO was sold by Dr. Gregory Whitten, the Chairman of Numerix Software, car enthusiast, Ferrari connoisseur, and vintage racing driver. According to Bloomberg, Whitten had purchased the Ferrari in 2000, with the market price for Ferrari's being around $10 million at the time. 

The sale came at RM Sotheby's annual Monterey auction held at the Monterey Conference Center. RM Sotheby's website says this year's event welcomed bidders from 37 different countries and was the highest grossing event from Monterey Cars Week, with 83% of all cars offered at the RM Sotheby's auction finding new owners.

As for the 250 GTO, RM Sotheby's notes that this car was long considered "the holy grail" of the car collector world, leading to much anticipation for its public auction. 

According to a statement on RM Sotheby's website, "There were cheers and applause when five-time Le Mans winner Derek Bell stepped out of the car after driving it across the auction block in front of an overflowing salesroom, followed by gasps as auctioneer Maarten ten Holder opened the bidding at the unprecedented level of $35 million." 

Sotheby's said the three collectors bidding for the car actually competed by telephone for 10 minutes as the packed house listened and looked on, with multiple millions moving in increments before the new owner hit the final auction price of $44 million. An additional $4.4 million in auction fees were added to bring it to the record-breaking price.  

The new owner's identity has not been released. 

Bloomberg reports Ferrari built just 36 examples of the 250 GTO Model model between 1953 and 1964.  

RM Sotheby's said the $48.4 million dollar auction price exceeds the previous record-breaking price by more than $10 million.  

SEE ALSO: These 18 beautiful, vintage cars are worth millions and are up for auction at Pebble Beach

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• Morgan Stanley Wealth Management has told its clients to "consider taking profits" in the consumer-discretionary sector and has offered three alternatives. 
• Consumer spending contributes to more than two-thirds of the US economy's growth. 
• The firm's investment committee said the economic boost from tax cuts may be short-lived, and highlighted other trends that could set back the American consumer. 

The consumer-discretionary sector is the stock market's best performer of the last decade — but now it's time to consider taking profits, says Morgan Stanley Wealth Management. 

The sector's chart-topping performance on the S&P 500 is just one reason for the recommendation offered by Lisa Shalett, the head of investment and portfolio strategies, in a note on Monday.

Companies in the sector range from automakers to apparel makers and casinos, which make goods and services that consumers splurge on. Consumer spending contributes to more than two-thirds of the economy's growth.

And so, Shalett's sector call further makes the case that the backbone of the $20 trillion-plus US economy could be headed for a slowdown. 

It comes even as the US economy remains in recovery mode, with growth in the second quarter rising at the fastest pace since 2014; a revision is due Wednesday. Consumer confidence in August was the highest in 18 years, according to the Conference Board. Retailers from Walmart to Target reported strong second-quarter earnings. 

Shalett doesn't discount any of these signs, but says they may not be telling the full story. 

"The Global Investment Committee is skeptical, believing that current expectations and stock valuations embed a continuation of cycle peak trends when, in fact, we see the data rolling over, headwinds strengthening and household balance sheets increasingly stressed," she said. 

Shalett says consumer spending may lose its strength as the dual benefits of tax cuts and increased fiscal spending fade. That's separate from the recent and specific data that's of concern to Morgan Stanley.

According to the Tax Policy Center, a Washington, DC-based think tank, the tax cuts would add 0.7% to US Gross Domestic Product this year, 0.4% in 2021, and just 0.1% in 2026. After individual tax cuts expire in 2027, the TPC doesn't expect any economic boost. 

For now, one trend that could put the brakes on consumption growth is housing affordability, Shalett said. A separate Morgan Stanley analysis recently showed that Americans are forking out the most in monthly mortgage payments relative to their incomes since 2008.

"At issue is that housing costs have outpaced growth in real personal income, a situation that in the past has coincided with a slowdown in consumer spending," Shalett said. 

The ratio of interest and principal payments as a share of monthly income is at 22%, thanks to rising home prices and higher mortgage rates. With the Federal Reserve expected to continue raising interest rates through next year at least, there's no short-term fix to the affordability problem in sight. 

Another area of vulnerability is in how consumer-focused companies respond to rising costs. These so-called supply chain pressures include higher freight costs, energy costs, and wages, which could squeeze profit margins and be passed on to consumers. 

"Consider taking profits in the consumer discretionary sector," Shalett said. "Focus on active managers and more defensive plays in health care, consumer staples and utilities."

SEE ALSO: The stock market's record-breaking run is masking a dangerous trend brewing under the surface, Morgan Stanley says

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This article originally appeared on Bitcoin Magazine.

• Marijuana producers saw a major sell-off on Tuesday.
• A slew of investments by beverage companies spurred a rally across sector in recent months. 
• Tilray, one of the largest marijuana stocks, is set to report earnings after the closing bell Tuesday.

After a week of massive gains, shares of the three largest publicly traded marijuana companies saw a massive sell-off Tuesday, down between 5% and 9%, as Tilray plans to release its first-ever earnings report.

Here's how they stand:

• Canopy Growth: -10.8%
• Tilray: - 4.6%
• Cronos Group: -11.9%
• Aurora Cannabis: -10.4%

The Horizons Emerging Marijuana Growers Index ETF, which tracks other smaller producers in Canada, fell about 5%. 

Tilray, the second largest publicly traded cannabis company by market cap has surged 138% since its initial public offering in July. Analysts polled by Bloomberg are expecting the British Columbia-based company to report an adjusted second quarter loss of $0.85 a share on revenue of $9.02 million. 

Canopy, the only company worth more than Tilray on public markets, posted a loss of $0.11 a share in its first quarter. 

Tuesday's selloff comes after a hot streak for marijuana stocks that stems all the way back to Canada's full legalization vote in June. Canopy, for instance, has risen 548% since its Nasdaq debut a year ago, fueled by massive investments from Constellation Brands, the company behind massive beers like Corona and Modelo. This week, Bloomberg reported that British spirits maker Diageo was discussing a deal with three Canadian marijuana companies.

Legal sales of marijuana are set to begin nationwide in Canada on October 17. 

SEE ALSO: The 'world's biggest legal-pot dealer' talks about taking his company public and the future of weed (CGC)

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Here's what you need to know about the problems facing the technology backing Bitcoin and other cryptocurrencies

• Members of online communities of credit-card super users have been freaking out over the past year after hearing stories from some JPMorgan Chase cardholders that the bank shut down their credit-card accounts.
• Since the credit-card rewards arms race ramped up a couple of years ago following the Chase Sapphire Reserve launch, credit-card enthusiasts who make a hobby of accumulating points for free travel and other perks have swelled in numbers.
• Like card sharks in a casino, these customers tend to be very savvy, know all the rules and angles, and can eat away at a bank's credit-card profits.
• Chase has gained widespread attention for its lavish rewards program, but profitability in its card division has fallen as it spends billions on rising rewards costs.
• The shutdown cases are anecdotal, but they suggest that Chase may be taking a harder line with credit-card gamers who open too many accounts.

Two years ago this month, JPMorgan Chase unleashed an industry-rattling new product: the Sapphire Reserve, a premium travel reward credit card with an eye-popping 100,000-point sign-up offer and innovative travel perks.

Chase quickly amassed hordes of excited customers, despite forgoing traditional marketing and relying on word of mouth. It eclipsed its one-year sales target in the first two weeks, despite a hefty $450 annual fee. It temporarily ran out of the card's signature metal core.

The viral reaction to the Sapphire Reserve's launch caught the attention of rival card companies competing for a slice of the industry's $183 billion in fees and interest. Copycat efforts were launched over the following year to keep pace with Chase’s juggernaut, taking to new heights an already expensive and years-long battle to attract credit-card customers by hurling juicy rewards perks at them.

"In the aftermath of the Chase Sapphire Reserve, I think that signaled a kind of arms race in the rewards space," said Brian Kelly, the founder and CEO of the ThePointsGuy.com, one of the most popular and long-running sites for travel-rewards enthusiasts.

Chase, thanks to the Reserve and a number of other new cards that it's launched in the past year, has succeeded in luring millions of new customers. Yet the rewards arms race and the new clientele the bank has attracted have taken a toll. JPMorgan's card income has fallen by 25% in the past two years amid soaring rewards expenses.

Top JPMorgan executives maintain that the significant investments in attracting all these new customers — especially the Sapphire Reserve cardholders, who skew young and wealthy — will pay off in the long run.

Chase hasn't sat idle, though, taking measures to trim costs. It cut the sign-up bonus of the Sapphire Reserve in half, to 50,000 points in January 2017, less than six months after the card launched.

This May, leaked documents revealed Chase was cutting back on other credit-card benefits, such as Priority Pass lounge access and price protection, changes that took effect this week.

And over the past year, some credit-card super users have grown anxious that Chase might be targeting them for cuts too.

The ranks of these super users, who try to maximize card perks while minimizing the interest and fees they pay card issuers, have swelled in recent years, fed by a cottage industry of sites, services, and online communities that have popped up to help them stay on top of the smartest ways to earn and redeem points.

Alarming stories started appearing online in forums and blogs frequented by the users. Customers with no obvious credit black marks or rules violations were suddenly having their card accounts shut down by Chase.

Chase declined to comment specifically on the shutdown incidents cited by customers or whether it had targeted certain types of behavior to root out, but said the company gears its products toward long-term customers.

"We want to build lifelong relationships with our customers. We know our engaged, long-term customers are more satisfied and we design our products with this in mind," a company spokeswoman said in a statement.

On Reddit, FlyerTalk, Doctor of Credit, and other venues for rewards junkies, stories of account shutdowns started to pile up over the past year, as did warnings to apply for new Chase cards with caution.

Even on The Points Guy, a community for more mainstream credit-card users, readers were cautioned in a post from May that "recent reader reports indicate that applying for too many Chase cards too quickly can lead to account scrutiny and complete Chase shutdowns."

"Looks like Chase is seriously cracking down," Reddit user Morphogencc also wrote in May. "I recently tried to use my Sapphire reserve card and it didn't work. I was a bit surprised and checked my online account — and all my accounts were closed."

Morphogencc, who said in the post that they hadn't applied for any cards in months, was fortunate. They called Chase to appeal and the shutdown was reversed, though they told Business Insider that Chase never gave them a formal reason for why they were reinstated.

Others haven't been as lucky. On a blog called Travel In Points, another Chase super user, who goes by the Reddit handle SJ0, gave a detailed blow-by-blow of having his accounts shut down in December after a nearly 10-year relationship with the bank. His shutdown was final.

"It's really weird. There is no set rule," SJ0, who declined to use his full name, told Business Insider.

Was the game up?

'This is terrifying'

Doctor of Credit, a popular site for credit-card enthusiasts founded six years ago, started to notice something different around May 2017. The site's senior contributor and editor, who goes only by his first name, Chuck, saw an uptick in Chase cardholders discussing account shutdowns, usually in connection to having several recent credit inquiries or card openings.

"The bottom line is that there’s a new animal in the room," he wrote.

One the most prominent gathering places for super users to report and discuss the issue is on the Reddit forum r/churning, a subreddit with 135,000 subscribers dedicated to maximizing credit-card points, especially through sign-up bonuses.

Churning, or opening a card and collecting the bonus before ditching it, is frowned upon by credit-card issuers because it costs them money in loyalty rewards given to people who don't demonstrate loyalty. The churning community on Reddit is a particularly ardent and sophisticated subset of credit-card super users.

But toward the end of last year, enough of these stories were cropping up in the forum's daily discussion threads that the subreddit’s moderators created a "megathread" in December dedicated to collating and analyzing the "rash of shutdown reports" in granular detail. (Reddit threads are archived after six months, so a second megathread on Chase shutdowns was started in June.)

To suss out what was happening, moderators asked Redditers posting shutdown reports to include personal info like how many credit cards they'd opened and when, their FICO scores, credit use, spending behavior, any derogatory credit history, and stated explanation for their account closures.

Among the users in this group, Chase commonly cited too many recent credit inquiries, too much extended credit, or too many open accounts as reasons for closing their accounts. Most cardholders said they called Chase to appeal; some said they succeeded in getting Chase to reinstate their accounts, while for others the decision was final.

The vagueness of “too many” and “too much” was perplexing and foreboding to the community. Many credit-card enthusiasts could meet those definitions — and could have for years — depending on where the line was drawn.

It wasn’t clear what precisely was triggering the shutdowns, nor the rationale behind who got reinstated. One user with 40 new credit cards opened in the past two years — 10 with Chase — said they got their shutdown reversed; another user with 10 credit cards total — none opened in the past year and a half — and a more than decade-long Chase credit-card relationship said Chase refused to reinstate the two cards it shut down.

According to Chase's rewards program user agreement, cardholders can lose points or immediately have their points revoked if Chase closes the account because it suspects misuse of the rewards program "by repeatedly opening or otherwise maintaining credit-card accounts for the purpose of generating rewards." It doesn't lay out the criteria for determining such misuse.

But in general, these cardholders were told they had 30 days to use their points after being shut down, and misusing the rewards program wasn't cited as a reason for the shutdown. Was there another reason at play? A sign that Chase was finally targeting the savviest users as they eat away at profitability?

“Well s--- ... this is terrifying. I don't know what else to say,” the thread’s moderator commented on a shutdown report from July that Redditers struggled to make sense of.

Some churners weren't convinced Chase had them in their sights, but to many, the implication of the growing number of shutdowns was clear: If Chase was targeting churners, the rewards party could be coming to an end.

The rewards arms race and the rise of super users

While loyalty rewards programs for travelers have existed for decades — the first was started by American Airlines in 1981 — the ranks of super users have grown massively, and the notion of treating credit cards like hobby has proliferated amid a golden age for travel perks.

After post-financial crisis legislation capped fee opportunities for debit cards in 2010, banks shifted their efforts and resources toward credit cards. Rewards for debit cards vanished, while credit-card rewards exploded.

A study by personal-finance website Magnify Money estimated that rewards spending jumped from $10.6 billion in 2010 to $22.6 billion in 2016 among the six largest credit-card issuers: American Express, Bank of America, Capital One, Chase, Citigroup, and Discover.

A study released in March by payments-processing firm TSYS found that rewards were the most important credit-card feature to 68% of Americans, up from 52% in 2014.

"It's a secular shift in terms of the value proposition of credit cards being about the rewards. Customers are just much more aware of the rewards that are available to them," Jennifer Piepszak, the CEO of Chase's card business, recently told Business Insider in a video interview.

Kelly, who has grown ThePointsGuy.com into a multimillion-dollar business with 6.6 million monthly readers, up from 4 million a year ago, told The New Yorker last summer that we're living through a "golden age" for travel, especially if you know how to "get the right cards."

The average introductory bonus offer for travel rewards cards from the top five US issuers was more than 40,000 this year, up from about 34,000 in 2013, and more than double the average offer of 16,000 in 2008, according to a study from Magnify Money.

The arrival of the Sapphire Reserve in 2016 was like dumping a drum of accelerant on the already growing fire of credit-card-rewards fervor.

It was a eureka moment for many consumers, especially travel-thirsty millennials: 100,000 points amounted to $1,500 in travel with Chase, or a few round-trip tickets to Europe if you played your cards right.

For the shrewdest operators, it can amount to a lot, lot more. Inefficiencies between certain airline loyalty programs mean you can sometimes transfer points from your credit card to an airline for substantially more value. Kelly, for instance, has used 92,000 miles — transferable from several credit-card-points programs at a 1:1 ratio — to book a one-way first-class ticket from Hong Kong to San Francisco on Singapore Airlines, a ticket that can easily eclipse $12,000 when paid in cash.

"Chase is the godfather of rewards right now," Kelly said.

While this has been a boon to the growing community of credit-card super users, it's very expensive for credit-card issuers.

For Chase, profitability from its card business has fallen as rewards spending has climbed.

Card income dropped 25% in the past two years, from $5.9 billion in 2015 to $4.4 billion in 2017, while spending by Chase's credit-card customers increased 26%, from $496 billion to $622 billion.

And credit card net charge-offs — delinquent debts the company deems unlikely to be collected — at Chase increased from $3.1 billion to $4.1 billion between 2015 and 2017, a 32% uptick.

Meanwhile, Chase's rewards liability — which represents the bank's estimated cost of reward points earned and expected to be redeemed — increased from $3.8 billion at the end of 2016 to $5.5 billion midway through 2018, the most current tally. The bank did not start reporting or breaking out costs associated with its rewards liability in regulatory filings before this year.

JPMorgan Chase executives say their rising rewards costs are a byproduct of strong customer retention and engagement, especially among premium products like the Sapphire Reserve.

The bank isn't alone in feeling the rewards burden. American Express, Chase's top competition in premium credit cards, saw its rewards costs increase 9%, from $7 billion in 2015 to $7.6 billion in 2017.

Robert Hammer, CEO of payments consulting firm R.K. Hammer, said rewards customers are traditionally a great clientele to have in many respects, though you won't make as much money out of them from the traditional revenue streams.

"They're not deadbeats. They will often pay off every month," Hammer said, but credit-card issuers are "never going to get a dollar of interest out of them."

Chase, American Express, and others are in the long game, and they're betting that the young, wealthy clientele who sign up for these type of cards laden with expensive perks will eventually be worth more than they cost to lure in.

"One of the key weapons in banks' arsenal as they fight for new customers is a robust reward-card offering," Kevin Morrison, a senior analyst covering retail banking and payments at Aite Group, a consulting firm, said in a report published in February. "The key challenge is how to provide compelling offers that will attract and retain consumers in a profitable manner."

'Back when I started, Chase was really easy'

How many credit cards and sign-up bonuses are too many?

Credit-card issuers of all stripes have been grappling with ways to curb their costs from sign-up bonus abusers, even as they wage a fierce battle to attract customers with those very same bonuses.

There's no bright-red line distinguishing a gamer or a churner, both of whom may share the same characteristics as the high-end consumer companies covet so much. Both tend to have strong credit scores that enable them to take out a bevy of credit cards, as well as the income and prudence to never carry a balance. Sapphire Reserve cardholders have, on average, a FICO score of 785 and an income of $180,000, according to Chase.

There are no precise demographic figures on churners, given the lack of a clear definition, but the ranks of churners appear to have increased substantially. In the Reddit community, self-described churners have more than doubled in the past two years, from about 50,000 to nearly 135,000, according to internet archives.

SJ0, the cardholder who was shut down in December, said he started churning in 2015. He details his journey as a low-income grad student collecting credit-card points on his Travel In Points blog. In his first year, he took out 34 cards and amassed more than 2 million credit-card points.

The value of points varies across loyalty programs, but even at a rate of $0.015 cents per point that amounts to $30,000.

"Back when I started, Chase was really easy," he told Business Insider. "I actually got three Chase cards in a single month."

The Points Guy's Brian Kelly distinguishes himself and TPG from churners. Kelly, who has 24 cards, is wholly in favor of taking advantage of sign-on bonuses, but he advocates that points enthusiasts keep cards open and spend on them past the introductory period.

"Credit-card bonuses are really juicy — trust me, I love them, too — but be a good customer to the banks. Don't be a jerk and just close an account right away," he said, adding that gamers can cost banks significant money. "You really don't want to get in the habit of opening and closing cards. The credit-card companies are becoming very savvy about weeding you out as a bad customer."

Most card issuers have instituted policies to curb gaming activity, but typically they're proactive, limiting how many cards you can sign up for or the bonuses you can earn over a given period rather than cancelling accounts later. Gone are the days of opening and closing the same card repeatedly to snag its bonus.

Amex, for instance, restricts access to its welcome offers based on past offers you've earned or the number of cards you've opened and closed, debuting a new alert tool in June to warn customers if they're applying for a card but aren't eligible for the bonus.

Chase instituted its "5/24" rule a couple of years back, which prohibits customers from opening certain cards if they’ve opened up five credit cards across any issuer within two years. It's not used to retroactively shut down customer accounts.

Wholesale account shutdowns weren't previously part of churners' calculus, so long as you weren't committing flagrantly suspicious behavior, like buying or selling points or buying loads of gift cards to "manufacture" artificial spending and thus earn extra points.

SJ0 wrote on his blog after his shutdown: "Previously, if you did not do fishy stuff, like anonymous bill payment, selling points, etc., then you were pretty much on the safe side. But this new reason for shutdown clearly indicates that even if you don't do those things you may not be on the safe side."

Card companies have few restrictions on closing accounts

Companies aren't obligated to serve customers who aren't profitable to them. Amazon caused a stir earlier this year for axing customers who were returning too many products. Best Buy and several other retailers got blowback for taking similar measures.

Credit-card issuers have even more at risk, given they're providing unsecured loans. They can't take your home or other assets if you don't pay them back, unlike a mortgage or other secured loan.

All banks manage their customer bases, as they're required by regulators to do. They have wide latitude to exit credit-card relationships to manage risk, root out illegal behavior, or to ensure profitability.

Banks and other credit-card issuers will shut down customer accounts for a variety of reasons, and they don't even necessarily need a good reason.

But companies are typically loath to cut customers loose, especially those with strong credit who pose little default risk — the types of customers they're spending billions on rewards to attract in the first place.

Card companies also recognize canceling accounts is a very negative experience for the consumer, whose credit score can take a hit, depending on how much credit they're losing and how long they've had the accounts open.

It's entirely possible some customers facing shutdowns are getting flagged because of their risk profile. A customer opening up lots of accounts may have run into financial hardship and could run up a tab before veering toward bankruptcy.

But there are innocent explanations as well — healthy customers take out cards to finance a new business, or a wedding, or to get through temporary job loss. They can often sort that out by calling in to explain, which has had mixed results for Chase super users facing shutdowns.

Moreover, there are many ways to mitigate that risk without completely shutting a customer down, like limiting credit and cash advances.

A gamer could also get caught up in a company's fraud-detection system.

Some in the churning community have theorized that Chase's shutdowns may be connected to an increase in bust-out fraud, which is when a con artist uses a stolen or synthetic identity and opens an account, lays low and behaves responsibly for a time, and then quickly shells out a string of purchases and maxes out their credit line before disappearing.

This is quite costly for the card companies, who've established algorithms and sets of behavior to identify bust-out-fraud candidates and root them out.

Chase could have suffered an increase of bust-out fraud amid the glut of new accounts, which tend to have higher rates of fraud, acquired since the launch of Sapphire Reserve and other new cards, tweaking its fraud monitors in ways that simultaneously flag super users, according to credit-card executives.

Given the string of data breaches from retailers and Equifax, there's a lot more personal data floating around to engineer fake accounts with, and card issuers have witnessed an uptick in fraud, according an executive at a top credit-card issuer, who requested anonymity since he was not authorized to speak publicly about the matter.

It's also possible that the customers are flagged by Chase's fraud or risk algorithms, and then, after review, the issuer decides the relationship isn't profitable enough to warrant keeping.

Banks are spending millions to advance their capabilities with artificial intelligence and machine learning to flag credit risk, fraud, money laundering, or other criminal behavior. But "those capabilities also exist for portfolio optimization and profitability analysis," according to Michael Brauneis, the head of the US financial-services practice at consulting firm Protiviti.

Brauneis, who has two decades of experience in regulation risk and compliance, said "there's nothing in the law that prohibits the bank from closing" accounts that aren't economically profitable.

In fact, Chase's card-member agreement warns of this possibility (emphasis added):

"We are not obligated to honor every transaction, and we may close or suspend your account. Sometimes we close accounts based not on your actions or inactions, but on our business needs."

It's unclear where the line is drawn for those trying to reap so many sign-up bonuses, but most of Chase's millions of credit-card customers "have absolutely nothing to worry about," Kelly said.

"People who take it to the extreme will get shut down, and frankly I think they should because they ruin it for everyone else," Kelly told Business Insider.

The super users reporting shutdowns bear little resemblance to everyday consumers who pad card issuers' bottom lines with billions fees and interest — many of whom run up debts or pay only casual attention to collecting and redeeming rewards.

Casinos make their billions on the masses of tourists and novices who play their games without a clue. Card sharks use skill, and sometimes deception, to eat away at their profits. If Chase is the largest credit-card-rewards casino in the country, churners are their card sharks.

For years, even as their numbers grew, churners largely managed to slip by without getting the boot. But has the house finally decided to come down on them?

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• The South African rand rose 1% before erasing gains Tuesday.
• The African National Congress ruled to withdraw a land-reform bill passed in 2016.
• Watch the South African rand trade in real time here.

The South African rand seesawed Tuesday after the country's ruling party withdrew a land-reform policy passed by parliament in 2016 amid a constitutional review.

The rand erased gains of as much as 1% — to below 14 per US dollar — after the parliament's portfolio committee on public works ruled to withdraw the bill enabling plans to expropriate land without compensation. The party said it was withdrawn in efforts to allow "an ongoing process that could lead to the changing of the constitution to pave way for expropriation of land without compensation," Reuters reports.

The currency had come under pressure after Trump commented on the policy in a tweet. 

"I have asked Secretary of State @SecPompeo to closely study the South Africa land and farm seizures and expropriations and the large scale killing of farmers," Trump tweeted. "'South African Government is now seizing land from white farmers.'"

He tagged Fox News host Tucker Carlson, who had just taken aim at the State Department for not weighing in on the proposed land reforms. 

Jameel Ahmad, global head of currency strategy at FXTM, said the tweet added further selling pressure "on concerns that South Africa could be next in line to face the wrath of President Trump."

"The United States President recently tweeted around one of the most sensitive issues in post-apartheid history, land reform," Ahmad said.

"The tweet from Trump initially prompted fears that South Africa could unexpectedly find itself as the next nation to be under the public eye due to President Trump’s focus of attention."

SEE ALSO: 10 things you need to know before the opening bell (SPY, SPX, QQQ, DIA, TM, BRK.A)

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• A man was arrested on Monday after jumping the fence at Los Angeles International Airport and running onto the runway near a Delta Air Lines plane.
• Shortly before 1:30 p.m. local time, a man scaled the barrier security barrier near Sepulveda Boulevard and Lincoln Avenue and was seen running toward an idle Delta plane.
•  Following interviews with airport police, the man was booked for trespassing. 
• A LAX Public Information Officer for Airport Police tells Business Insider the man's motivations were "a combination of mental illness and possible narcotics involved." 

  ---

A man was arrested on Monday after jumping the fence at Los Angeles International Airport and running onto the runway near a Delta Air Lines plane.

According to CBS 4 Los Angeles, shortly before 1:30 p.m. local time a man scaled the barrier security barrier near Sepulveda Boulevard and Lincoln Avenue. He was then seen running near an idle Delta Air Lines plane, where CBS 4 reports officers said he tried to hide underneath the plane before they arrived. He was then taken into custody.

Rob Pedregon, LAX Public Information Officer for Airport Police, told Business Insider that the suspect is a 23-year-old man from the Los Angeles area. When asked what the suspect's motivation was for climbing the security barrier and reaching the runway, Pedregon stated, "a combination of mental illness and possible narcotics involved," where the suspect was on those narcotics at the time of the incident.  

According to CBS News, police have yet to release more information pertaining to whether the man was armed.

Pedregon told Business Insider the man was arrested and booked for trespassing, where a trial date will be set. 

CBS 4 Los Angeles reports the man was also interviewed by the FBI. 

LAX is America's second busiest airport after Hartsfield-Jackson Atlanta International Airport, where earlier this summer a man was also arrested for scaling a fence and jumping on the runway, though in that instance he was only in his underwear.

At LAX on Monday, a couple of passengers on the idle Delta flight took pictures of the incident and shared them on social media, with users noting the man started doing push-ups. 

SEE ALSO: A federal air marshal was hauled off a plane in handcuffs after a flight attendant saw his gun and freaked out

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The Federal Reserve Bank of St. Louis has published another research paper validating bitcoin’s legitimacy as a currency, even when used as a tool to facilitate private transactions. The report, which was written by economist Charles Kahn and published by the St. Louis Fed last month, examines the role of private payments in monetary systems. … Continued

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• McDonald's has been aggressively updating its US stores under its Experience of the Future initiative. 
• McDonald's now has 5,000 Experience of the Future restaurants in US and will add 4,000 more by this year.
• The fast-food chain is taking short term pain for long term gain, Jefferies analysts said.
• Watch McDonald's trade in real-time here.

McDonald's is taking short term pain for long term gain when remodeling its fast-food experience, says a team of analysts from Jefferies.

The fast-food giant has been aggressively updating its US stores under its Experience of the Future initiative, which focuses on restaurant modernization and digital engagement. On the company's second-quarter earnings call, CEO Steve Easterbrook said there are now 5,000 EOTF restaurants. 

"The Company expects capital expenditures for 2018 to be approximately $2.4 billion," McDonald's said in a July 26 press release.

"About $1.5 billion will be dedicated to our U.S. business, primarily focused on accelerating the pace of EOTF. We expect to complete EOTF at nearly 4,000 additional U.S. restaurants in 2018, and, as a result, about half of the total U.S. restaurants will have EOTF by the end of 2018." 

Jefferies thinks McDonald's efforts on service model, digital channels, and loyalty initiatives are paying off, suggesting the use of the mobile app for some dollar deals helps drive downloads and Mcdonald's $1/2/3 platform still gains traffic in a very competitive environment. That will reaccelerate the company's US same store sales into fiscal year 2019, they said. 

The team has a "buy" rating on McDonald's, with a $190 price target — 18% above where shares are currently trading. 

SEE ALSO: MORGAN STANLEY: Amazon and Walmart are duking it out in a $4 trillion market

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• As Amazon has led the online retail revolution, the manner in which companies price their goods has been permanently changed.
• A new study from Harvard Business School assesses the impact of these changes on consumers, as well as the Federal Reserve, which watches prices closely when making monetary policy decisions.

Over time, it's become a widely accepted fact that Amazon has pushed retail prices lower.

The company's offerings are so diverse that they can afford to sell many products at razor-thin margins, then make up for it in other, less competitive areas.

In the process, Amazon forces other retailers to lower their prices, putting pressure on their bottom lines. And, in many cases, it's forced these competitors to permanently alter their pricing strategies.

But it doesn't end there. A new study from Harvard Business School argues that the so-called "Amazon effect" has increased both the frequency and magnitude of retail price fluctuations. ...

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SEE ALSO: Warren Buffett disciple Scott Black breaks down a major shift that's permanently changed investing — and explains how he's managed to survive

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Bitcoin has broken the $7,000 psychological resistance level after climbing out of a 20-day channel between $5,873 and $6,800.

• As Toyota invests in Uber and other self-driving-vehicle startups, one analyst is worried Tesla could get left behind.
• "We are left wondering if Tesla should have been in the mix for those investments; the company's volatile image could also leave it out of the discussion for future investments," Canaccord Genuity told clients Tuesday.
• Follow Tesla's stock price in real-time here.

Tesla CEO Elon Musk is worried about traditional, carbon-burning automakers having an outsize stake in Tesla, having rejected Volkswagen's offer to invest in a go-private buyout, according to The Wall Street Journal.

Now one Wall Street analyst is worried this aversion could be costing Tesla, especially as other upstarts partner with old-guard automakers to gain a leg up.

"Investments in autonomous vehicles continue to grow," Jed Dorsheimer, an analyst at Canaccord Genuity, told clients Tuesday.

"Toyota recently announced a $500 million investment in Uber in an effort to develop driverless vehicles. It also announced a $1B investment in Grab (Southeast Asia's Uber equivalent) earlier in June. Although details were not disclosed, we are left wondering if Tesla should have been in the mix for those investments; the company's volatile image could also leave it out of the discussion for future investments in autonomous driving capabilities."

Dorsheimer has slashed his price target for Tesla shares to $316 — roughly in line with Tuesday's opening price — from $336 following Musk's failed bid to take the company private. Specifically, he's worried about the $230 million and $920 million of corporate debt due in November and March.

"Tesla will need to secure profitability by the end of the year to maintain solvency," Dorsheimer wrote. With Tesla's second-quarter earnings report indicating the company had only $2.2 billion of cash on hand, he estimates Tesla "only has enough cash to maintain operations for another six to nine months at its current rate."

Shares of Tesla fell about 1.1% in trading Monday, their first trading day since Musk announced late Friday that he was scrapping his go-private bid, citing feedback from both institutional and retail investors. The 16-day saga — that has now involved an investigation by regulators and multiple lawsuits — has left many Wall Street analyst scratching their heads.

Now, all focus comes back to Tesla's balance sheet and its struggle to become profitable.

Analysts polled by Bloomberg have an average price target of $328 for the stock — about 3.4% above where shares were set to open Tuesday.

Now read:

• Amazon has helped changed the way retailers set their prices — here's how it'll affect everyone from shoppers to the Fed
• Warren Buffett disciple Scott Black explains why old-school value investing has gotten so difficult — and how he's managed to survive

SEE ALSO: Wall Street analysts tore down a Tesla Model 3 and found 'significant fit & finish issues'

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• A Goldman Sachs staffer in London is set to appear on hit TV show The Great British Bake Off.
• Antony Amordoux works in operations in the bank's London offices.
• He joins other finance workers who have appeared on the show, including Selasi Gbormittah, a Deutsche Bank employee who made waves in the 2016 series of the show.

A long serving employee at Goldman Sachs is set to appear on the hit UK TV show The Great British Bake Off, which starts on Tuesday evening.

Antony Amourdoux, who works in operations for Goldman in London, according to the Daily Telegraph, will appear on the show, which pits amateur bakers against one another for the chance to be crowned "Star Baker."

Amordoux, who is 30, grew up in India, and previously worked for the bank in its Bengaluru office. He moved to London in 2016, and according to the Telegraph has worked for Goldman since 2009.

Amordoux's precise role at the bank is unclear, although the Telegraph reports that he is "responsible for signing partnerships with the firm’s top clients." His LinkedIn profile lists only his education.

"All of my friends back home in India will be really surprised," Amordoux told The Sun. "They have known me to be a singer in a choir, a two-piece band but never as a baker, so it will be interesting to see their reaction."

The Telegraph reports that Amordoux last week sent a memo to colleagues saying that he previously had a mantra to "wing it," but has since changed his approach:  "I changed my mantra to start a plan and stick to it."

Amourdoux joins a growing list of City of London workers appearing on The Great British Bake-Off, with Selasi Gbormittah, a client service associate at Deutsche Bank appearing on the 2016 series, and James Hillery, the head of tax transparent fund implementation at financial services firm Northern Trust, appearing on last year's show.

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• A $1.5 billion money manager is teaming up with a California crypto startup on a new kind of index for the crypto world. 
• Morgan Creek's new fund is aimed at institutional investors, specifically family offices and endowments. 
• Unlike other funds, it will exclude cryptos based on their level of centralization.

A $1.5 billion money manager is looking to unleash the crypto markets onto pension funds and endowments with a new-kind of index aimed at institutional investors. 

Morgan Creek, the investment firm led by Mark Yusko, announced on Tuesday an index called the Morgan Creek Bitwise Digital Asset Index in partnership with California startup Bitwise Asset Management.  

Crypto indexes have been popping up at a fast clip since the beginning of 2018 as crypto firms eye big institutional pockets. Elsewhere in the market, Bloomberg partnered with Mike Novogratz's Galaxy Digital on an index. Coinbase also announced the launch of a fund to allow investors to put money into a basket or index of four of the largest cryptocurrencies.

But Morgan Creek is betting the set up of its fund will be more palatable for large investors, specifically pensions, family offices and endowments. The fund, similarly to others on the market, will give investors exposure to a basket of cryptocurrencies. But it will exclude certain cryptos that do not meet a certain level of decentralization, according to Anthony Pompliano, the head of Morgan Creek Digital, the fund's crypto unit. 

Tokens across the market for digital assets are structured differently. Some, like bitcoin, are released at a set amount via a process known as mining, whereas others are pre-mined and then released or managed by a centralized entity or foundation. 

Morgan Creek will exclude cryptocurrencies with foundations holding 30% of the supply of a coin. Pompliano said maintaining an index of less centralized cryptos is more appealing to cryptocurrencies because it opens investors up to less regulatory and technical risk. 

"A large centralized repository, increases threat vectors, governance issues, regulatory issues," Pompliano said. "By removing those type of assets from the index, you drastically reduce the risk that investors are exposed to."

As for regulatory risks, the degree to which a crypto is centralized could have implications on whether federal regulators would deem it a security. Ripple, the firm behind the crypto XRP, has faced lawsuits for issuing an unregistered security. Brad Garlinghouse, the CEO of Ripple, has said the crypto is not a security. 

The Morgan Creek index will not include XRP as the firm estimates Ripple's foundation fund controls about 55% of the total supply of the coin. 

The fund will offer investors access to the ten largest digital assets that meet the required threshold, including bitcoin and ether. Investors will be charged a 2% management fee. The type of institutions that have expressed interest in the product, according to Pompliano, include endowments, foundations, sovereign wealth funds, and pensions. 

Morgan Creek acquired Full Tilt, a North Carolina-based firm focusing on investments in the digital asset space, in March. 

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• A $1.5 billion money manager is teaming up with a California crypto startup on a new kind of index for the crypto world. 
• Morgan Creek's new fund is aimed at institutional investors, specifically family offices and endowments. 
• Unlike other funds, it will exclude cryptos based on their level of centralization.

A $1.5 billion money manager is looking to unleash the crypto markets onto pension funds and endowments with a new-kind of index aimed at institutional investors. 

Morgan Creek, the investment firm led by Mark Yusko, announced on Tuesday an index called the Morgan Creek Bitwise Digital Asset Index in partnership with California startup Bitwise Asset Management.  

Crypto indexes have been popping up at a fast clip since the beginning of 2018 as crypto firms eye big institutional pockets. Elsewhere in the market, Bloomberg partnered with Mike Novogratz's Galaxy Digital on an index. Coinbase also announced the launch of a fund to allow investors to put money into a basket or index of four of the largest cryptocurrencies.

But Morgan Creek is betting the set up of its fund will be more palatable for large investors, specifically pensions, family offices and endowments. The fund, similarly to others on the market, will give investors exposure to a basket of cryptocurrencies. But it will exclude certain cryptos that do not meet a certain level of decentralization, according to Anthony Pompliano, the head of Morgan Creek Digital, the fund's crypto unit. 

Tokens across the market for digital assets are structured differently. Some, like bitcoin, are released at a set amount via a process known as mining, whereas others are pre-mined and then released or managed by a centralized entity or foundation. 

Morgan Creek will exclude cryptocurrencies with foundations holding 30% of the supply of a coin. Pompliano said maintaining an index of less centralized cryptos is more appealing to cryptocurrencies because it opens investors up to less regulatory and technical risk. 

"A large centralized repository, increases threat vectors, governance issues, regulatory issues," Pompliano said. "By removing those type of assets from the index, you drastically reduce the risk that investors are exposed to."

As for regulatory risks, the degree to which a crypto is centralized could have implications on whether federal regulators would deem it a security. Ripple, the firm behind the crypto XRP, has faced lawsuits for issuing an unregistered security. Brad Garlinghouse, the CEO of Ripple, has said the crypto is not a security. 

The Morgan Creek index will not include XRP as the firm estimates Ripple's foundation fund controls about 55% of the total supply of the coin. 

The fund will offer investors access to the ten largest digital assets that meet the required threshold, including bitcoin and ether. Investors will be charged a 2% management fee. The type of institutions that have expressed interest in the product, according to Pompliano, include endowments, foundations, sovereign wealth funds, and pensions. 

Morgan Creek acquired Full Tilt, a North Carolina-based firm focusing on investments in the digital asset space, in March. 

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In the past 24 hours, despite the negative expectations of most investors towards Bitcoin, the crypto market has recovered by $12 billion from $216 billion to $228 billion. The Bitcoin price has surpassed a key resistance level at $7,000 after breaking out of the $6,800 mark, which as several widely recognized cryptocurrency traders emphasized, was … Continued

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• Best Buy's earnings beat on the top and bottom lines.
• The electronics retailer raised its full-year guidance, but missed expectations.
• Shares of Best Buy fell as much as 7%.
• Watch Best Buy trade in real-time here.

Best Buy reported better-than-expected second-quarter results on Tuesday, but shares plunged as much as 7% in pre-market trading as guidance disappointed.

The electronics retailer earned an adjusted $0.91 a share, easily beating the $0.82 that analysts surveyed by Bloomberg were expecting. Revenue rose 4.9% versus a year ago to $9.38 billion, topping the $9.28 billion that was expected, while comparable sales were up 6.2% YoY.

"We are happy to report strong top- and bottom-line results for the second quarter that exceeded our expectations,"  CEO Hubert Joly said in the earnings release.

"Our comparable sales growth was helped by the favorable environment in which we operate and driven by how customers are responding to the unique and elevated experience we are building. We are particularly encouraged with the continued progress of our Net Promoter Scores and our continued market share gains. We are excited about the progress we are making on the implementation of our Best Buy 2020 strategy and the opportunities in front of us." 

Best Buy boosted its guidance for adjusted earnings-per-share in the third quarter to between $0.79 and $0.84, but that was shy of the $0.91 that analysts were expecting.

The retailer sees its full-year adjusted earnings per diluted share between $4.95 and $5.10, up from its previous outlook of $4.80 to $5.00. Analysts were expecting $5.01.

As for revenue, Best Buy sees fiscal year 2019 sales of between $42.3 billion and $42.7 billion, ahead of the $42.34 billion estimate.

Shares of Best Buy were up 14% through Monday this year.

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A bitcoin fraud scheme has been unearthed in the Mumbai surburb of Mira Road. The scheme involved duping foreigners into parting with their money by informing them that they were behind in tax payments, according to the Hindustan Times. Based on the personal financial information they had obtained from their victims including loan arrears and

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• Evening Standard reports that Mark Carney has been asked to stay as Bank of England governor for an additional year.
• Carney is due to leave his role in June next year, but the Treasury is reportedly keen for him stay until 2020 to "provide continuity during the turbulence of Brexit," according to the report.
• Upon taking the job in 2013, he committed to a five-year term, three years less than is traditional for a Bank of England governor.

Mark Carney has reportedly been asked to extend his stay as Bank of England governor for a further year, a report from the Evening Standard on Tuesday said.

According to the newspaper's The Londoner diary column, officials from the Treasury have canvassed Carney about possibly staying at the helm of the central bank until 2020, rather than leaving in June next year, as is currently planned.

The report cites a desire from the government for him to "provide continuity during the turbulence of Brexit" as the reason behind the push. 

Carney took over from Mervyn King as Bank of England governor in 2013, initially committing to a five-year term despite the traditional protocol involving an eight-year term for governors.

In the months after Britain voted to leave the EU, however, he committed to an additional year as governor, citing "the importance to the country of continuity during the UK's Article 50 negotiations."

The Evening Standard also reports that the Treasury is "struggling to find a candidate strong enough to replace him."

Aside from Carney, possible candidates for the governor job include Andrew Bailey, the head of the FCA, Britain's financial regulator, and Ben Broadbent, one of Carney's deputies. 

When contacted by Business Insider, a Treasury spokesperson said: "We will begin recruitment for the next Governor of the Bank of England in due course."

The Bank of England did not immediately respond to a request for comment.

SEE ALSO: A 10% fall in the pound, a surging FTSE 100, and a drastic move from the Bank of England: here's how markets will react to a no-deal Brexit

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Here is what you need to know. 

The US and Mexico are overhauling NAFTA. The preliminary agreement says 75% of a car must originate in a NAFTA country (currently 62.5%) and that 40% to 45% of a car or truck's content must be made by workers earning more than $16 an hour.

The Trump administration is throwing $4.7 billion at US farmers to try and make up for their trade war pain. Soybean farmers — who have been hit particularly hard by the trade war with China — will receive $3.6 billion of aid.

Aramco has lost its unlimited access to Saudi Arabia's oil reserves. The state-run oil giant had its access to the kingdom's oil and gas reserves reduced to a 40-year supply, the Financial Times says. 

Cryptos saw an overnight boost. Dash — which has become somewhat of an alternate-transactions platform in Venezuela — spiked more than 20% overnight before paring its gains.  

The stock market’s record-breaking run is masking a dangerous trend brewing under the surface. The rally into record territory has occurred without participation from some key tech stocks that had propel the market high, Morgan Stanley says. 

Warren Buffett's Berkshire Hathaway is entering a $1 trillion market in India. Berkshire confirmed on Monday that it is investing  in One97 Communications Ltd., the parent company of Paytm, which is the largest mobile-payment company in India.

Toyota is investing in Uber as part of a self-driving car partnership. Toyota's $500 million investment values Uber at $72 billion, according to the Wall Street Journal. 

Stock markets around the world are higher. Hong Kong's Hang Seng (+0.28%) led the gains in Asia and Britain's FTSE (+0.37%) is out front in Europe. The S&P 500 is set to open little changed near 2,899.

Earnings reports keep coming. Best Buy and Tiffany report ahead of the opening bell. 

US economic data flows. S&P home prices will be released at 9 a.m. ET and consumer confidence will cross the wires at 10 a.m. ET. The US 10-year yield is unchanged at 2.85%. 

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NOW WATCH: An early bitcoin investor explains what most people get wrong about the cryptocurrency

Here is what you need to know.

The US and Mexico move to overhaul NAFTA. A preliminary agreement says 75% of a tariff-free car must originate in a NAFTA country (up from 62.5%) and that 40% to 45% of a car or truck's content must be made by workers earning more than $16 an hour.

The Trump administration is throwing $4.7 billion at US farmers to try to make up for trade-war pain. Soybean farmers — who have been hit particularly hard by the US's trade war with China — are to receive $3.6 billion of aid.

Aramco has lost its unlimited access to Saudi Arabia's oil reserves. The state-run oil giant had its access to the kingdom's oil and gas reserves reduced to a 40-year supply, the Financial Times says.

Cryptos saw an overnight boost. Dash — which has become somewhat of an alternate-transactions platform in Venezuela — spiked more than 20% overnight before paring its gains.

The stock market’s record-breaking run is masking a dangerous trend. The rally into record territory has occurred without participation from some key tech stocks that had propelled the market high, Morgan Stanley says.

Warren Buffett's Berkshire Hathaway is entering a $1 trillion market in India. Berkshire confirmed on Monday that it was investing in One97 Communications Ltd., the parent company of Paytm, which is the largest mobile-payment company in India.

Toyota is investing in Uber as part of a self-driving car partnership. Toyota's $500 million investment values Uber at $72 billion, according to The Wall Street Journal.

Stock markets around the world are higher. Hong Kong's Hang Seng (+0.28%) led the gains in Asia, and Britain's FTSE (+0.37%) is out front in Europe. The S&P 500 is set to open little changed near 2,899.

Earnings reports keep coming. Best Buy and Tiffany report ahead of the opening bell.

US economic data flows. S&P home prices will be released at 9 a.m. ET and consumer confidence will cross the wires at 10 a.m. ET. The US 10-year yield is unchanged at 2.85%.

Join the conversation about this story »

NOW WATCH: An early bitcoin investor explains what most people get wrong about the cryptocurrency

• As Amazon has led the online retail revolution, the manner in which companies price their goods has been permanently changed.
• A new study from Harvard Business School assesses the impact of these changes on consumers, as well as the Federal Reserve, which watches prices closely when making monetary policy decisions.

Over time, it's become a widely accepted fact that Amazon has pushed retail prices lower.

The company's offerings are so diverse that they can afford to sell many products at razor-thin margins, then make up for it in other, less competitive areas.

In the process, Amazon forces other retailers to lower their prices, putting pressure on their bottom lines. And, in many cases, it's forced these competitors to permanently alter their pricing strategies.

But it doesn't end there. A new study from Harvard Business School argues that the so-called "Amazon effect" has increased both the frequency and magnitude of retail price fluctuations.

The paper, written by associate professor Alberto Cavallo and presented at the Kansas City Fed's annual symposium, looks at how these two measures have changed over the past decade.

Cavallo finds that the Amazon effect has streamlined retail pricing and forced companies to be more adaptable to conditions. Further, as a byproduct of that, he notes that pricing has become more uniform across locations.

So what does this mean for the consumer? It means buckle up, because price changes are coming faster than ever.

That's because they're more exposed to geopolitical forces like higher tariffs, changing oil prices, and rapidly fluctuating foreign-exchange rates. And that exposure stems from the sensitivity and uniformity outlined above, argues Cavallo.

Given what's going on right now with President Donald Trump's global trade war, these risks are more pronounced than usual — meaning shoppers could be whipsawed by changing prices. And as long as the potential for trade retaliation remains high, there's a risk those prices will be too high for comfort.

Elsewhere in his paper, Cavallo breaks down how the Amazon effect is impacting the Federal Reserve. After all, consumer price inflation is arguably the most important piece of the central bank's monetary policy — and the rate at which it's planning to hike interest rates.

Cavallo is quick to acknowledge the degree to which increased pricing efficiency has kept inflation low. Because ultimately, the efficacy of rate hikes is somewhat undermined by companies who are able to nimbly adjust prices on the fly.

In the end, it appears that the Amazon effect has complicated matters for the Fed. And for shoppers, conditions could also get tougher if external forces push prices higher.

It's worth noting that while this entire phenomenon is commonly known as the Amazon effect — which is what Cavallo calls it in his paper — it refers more broadly to the rise of online retail. After all, to suggest that Amazon is solely responsible for this change undersells the influence of other successful companies.

Cavallo sums it all up nicely in his study:

"Retail prices are becoming less 'insulated' from these common nationwide shocks," he said. "Fuel prices, exchange-rate fluctuations, or any other force affecting costs that may enter the pricing algorithms used by these firms are more likely to have a faster and larger impact on retail prices that in the past."

SEE ALSO: Warren Buffett disciple Scott Black breaks down a major shift that's permanently changed investing — and explains how he's managed to survive

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• The stock market's rally to new highs is not an entirely bullish story, according to Morgan Stanley's equity strategists.
• The rally has been narrow as it has excluded some key tech stocks that had propelled the market higher. 
• Other gauges of so-called market breadth are of concern to them. 

As the stock market soldiers on to new highs, some less bullish trends are brewing under the surface, according to equity analysts at Morgan Stanley.

They've have warned all year long that stocks are in a rolling, drawn-out bear market.

While their thesis appears to fly in the face of the market's record highs, they're pointing to a group of indicators that suggests a rough patch ahead. 

It's market breadth, used by technical analysts to gauge the direction beyond what a plain chart of the S&P 500 shows. 

One key measure of breadth, which tracks the share of New York Stock Exchange-listed companies advancing versus those declining, rose to a new high in mid-August. But for Michael Wilson, the chief equity strategist at Morgan Stanley, there are "too many other measures of breadth" that are worse. 

"Specifically the % of stocks making new highs, the % of stocks above their 200-day moving average, the performance of equal weighted indices versus their market cap weighted sidekicks at both the broad index level and sector level are all showing signs of deteriorating breadth."

For more proof that the stock market's advance to new highs has been narrower than is obvious, Wilson pointed to tech stocks. 

The sector led the market's rise last year and early in 2018, but investors have knocked it off that pedestal in the place of healthcare stocks. Over the past two months, healthcare has gained 8% and contributed to more than a quarter of the S&P 500's total return, according to Goldman Sachs. 

Notably, big tech companies loved for their growth prospects fell out of favor amid concerns about how they handled their users' personal data.

But one bullish takeaway from tech's drop has been that the broader market has continued to rally without their support. 

However, Wilson noted that some of these stocks, including members of the so-called FAANGS like Alphabet and Apple, have the greatest pull in the market cap-weighted S&P 500. For him, this means the risk to the S&P 500 is ultimately to the downside if tech stocks continue to falter. 

"In our view, the narrowness of the S&P 500 has become extreme in this latest move to new highs and much more narrow than in January's prior high as already noted in the measures cited above," he said. 

Wilson observed that the S&P 500 excluding Apple, Amazon, and Microsoft has not yet made it to new highs even though the S&P 500 has.  

"We continue to think the market is speaking loudly with its defensive rotation, weak breadth and underperformance in former tech leaders," Wilson said.

"The message? The market seems to be (rightly in our view) worried about growth slowing later this year and next ... the bottom line is that we think the rolling bear market that began in January has unfinished business with US growth and small cap stocks the most vulnerable."

SEE ALSO: A group of investors with $16 trillion at stake is struggling to find success, and its survival is in jeopardy

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• Saudi Arabia's state-owned oil company, Aramco, has had its access to the kingdom's oil and gas reserves limited to a 40 year contract.
• Limiting the once evergreen contract was designed to prepare the company for opening to foreign investors and formalize its relationship with the state.
• The new contract was "one of several important steps undertaken to prepare Saudi Aramco for being listed," the Saudi energy ministry told the Financial Times.

Saudi Arabia has shortened the length of time that its state owned energy company, Saudi Aramco, will have guaranteed access to the kingdom's oil and gas reserves, as part of preparations for the eventual public listing of Aramco.

The new concession agreement between Aramco and the Saudi Arabian government now places a 40 year limit on the firm's access to the the kingdom’s oil and gas reserves, where before it had rights in-perpetuity, the Financial Times reported. 

But Saudi Aramco will still have the opportunity to renew before the 40 year contract expires.

Three people who had been briefed on the matter told the FT the change was in preparation for the stock market flotation and privatization of the company. Aramco's flotation was initially scheduled to take place this year, but has now been indefinitely delayed.

Khalid al-Falih, Saudi energy minister and chairman of  Saudi Aramco has said there is commitment to listing the company, but despite his comments there are indications that the country is unwilling or unable to currently do so.

The new contract was "one of several important steps undertaken to prepare Saudi Aramco for being listed," the Saudi energy ministry told the FT, adding the government was committed to "proceeding with the IPO, when conditions are optimum, at a time of its choosing."

The legal change to the contract was designed to move Aramco towards a formal relationship with the state, before opening the firm up to possible foreign investors, the three sources said. 

Following a delay in plans to open the company up to outside investors, the sources said that the move to limit the contract had been a waste of time and means ministerial control of Saudi Aramco has grown, as the company fought against limits to oil and gas access that it once held indefinitely.

The government originally argued for an even shorter contract of 20 years, more in-step with international oil companies, but it was decided this would have consequences for declared energy reserves, long term plans and the valuation of Aramco.

But 40 year contract is longer than most oil companies are able to obtain, and with Aramco still key to Saudi Arabia’s economy there is currently no indication that it wouldn't be renewed towards the end of the concession.

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Mark Karpeles has urged a U.S. federal judge in the state of Illinois to dismiss a fraud lawsuit brought on by former customers of the now-defunct bitcoin exchange Mt. Gox, by insisting that the U.S. court has no personal jurisdiction over him in Japan. Representatives for Mark Karpeles told U.S. District Court Judge Gary Feinerman

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Good morning! Here's what you need to know in markets on Tuesday.

1. The U.S. Department of Agriculture said on Monday its $12 billion farm aid package would include $4.7 billion in direct payments to farmers to help offset losses from retaliatory tariffs on American exports this season. The bulk of the payments, $3.6 billion, would be made to soybean farmers. That amounts to $1.65 per bushel multiplied by 50 percent of production, Undersecretary for Farm Production and Conservation Bill Northey said on a conference call.

2. Asian shares advanced again on Tuesday while major currencies held on to gains amid hopes global tariff tensions were abating as the United States and Mexico made a deal to overhaul the North American Free Trade Agreement. Investors expect Canada too would agree to the new terms to preserve a three-nation pact, ultimately dispelling the economic uncertainty caused by U.S. President Donald Trump's repeated threats to ditch the 1994 NAFTA accord.

3. Chinese crude steel production hit another record high in July, surpassing the previous peak struck in May this year. According to the World Steel Association, Chinese output rose to 81.2 million tonnes during the month, up from 80.2 million tonnes in June and the previous record high of 81.1 million tonnes set in May.

4. Nestle and Starbucks said on Tuesday they had concluded their licensing deal for the Swiss food giant to market the U.S. coffee maker's packaged coffees and teas around the world. The $7.15 billion deal grants Nestle perpetual rights to sell Starbucks products such as Starbucks, Seattle's Best Coffee and TeavanaTM/MC outside of the U.S. company's coffee shops, and will result in about 500 Starbucks employees shifting to Nestle.

5. ASX futures are pointing higher, up 0.18% against the S&P at 7.55am BST, after the US and Mexico reached a preliminary deal on a modernised version of the NAFTA trade agreement. The deal still needs to pass Congress but optimism on trade helped push US stocks to new record highs.

6. Toyota will invest about $500 million in Uber to jointly work on developing driverless vehicles, the Wall Street Journal reported on Monday, citing people familiar with the matter.

7. The Turkish lira tumbled around 1.05% against the US dollar on Tuesday (at 7.55am BST), hit by persistent concern about a diplomatic rift with Washington over a U.S. pastor on trial in Turkey. The slide left the lira down about 40 percent this year, driven by worries over President Tayyip Erdogan's grip on monetary policy and the stand-off with the United States over the fate of evangelical Christian Andrew Brunson. 

8.Berkshire Hathaway made an investment in India's One97 Communications, the parent of digital payments firm Paytm, a spokeswoman said on Monday. Billionaire Warren Buffett, who runs the conglomerate, was not involved in the transaction, according to the emailed statement from Buffett's assistant, Debbie Bosanek.

9. A narrowing gap between short-term and long-term borrowing costs could be signaling heightened risk of a U.S. recession, researchers at the San Francisco Federal Reserve Bank said in a study published on Monday. The research relies on an in-depth analysis of the gap between the yield on three-month and 10-year U.S. Treasury securities, a gap that like other measures of short-to-long-term rates has narrowed in recent months.

10. Four Transamerica entities will pay $97.6 million to settle U.S. Securities and Exchange Commission charges that they sold investments that were supposedly based on quantitative models but which did not work as intended, the regulator said on Monday.The settlement with the units of Netherlands-based Aegon NV includes a $36.3 million civil fine plus $61.3 million of disgorged sums and interest, all of which will be returned to investors.

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DPW Holdings Inc. will use power generated by the Valatie Falls, New York hydroelectric dam for a bitcoin mining farm that is expected to become operational in the fourth quarter. Valatie Falls Hydro LLC bought the 1-megawatt dam in March 2018 using debt financing from Digital Power Lending, a DPW subsidiary. DPW’s Super Crypto Mining

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This article originally appeared on Bitcoin Magazine.