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1. JPMorgan identifies a 'catch-all trade' that will profit from the biggest issues confronting investors — including a trade war03:58[−]

traders phones hands raised

  • JPMorgan's equity strategists have advised clients to be overweight small-cap companies that do much of their business in the US and aren't as exposed to global trade.
  • This group of stocks is a "catch-all trade" for profiting from higher economic growth and inflation while guarding against the downside of a trade war, said Dubravko Lakos-Bujas, JPMorgan's head of US equity strategy, in a note on Tuesday.
  • Year-to-date, the Russell 2000 small-cap index has gained nearly 10%.

The Dow Jones industrial average on Tuesday wiped its 2018 gains on trade-war jitters, but the same couldn't be said of the Russell 2000.

This difference between the two indexes — of major companies and small-cap stocks — shows that smaller companies are benefitting more from the biggest issues on investors' minds, including trade, regulation, and inflation. The Russell 2000 has outperformed both the Dow and the S&P 500 to gain nearly 10% this year.

Foreseeing this, JPMorgan's equity strategists advised clients late last year to tilt portfolios toward companies that do much of their business in the US. By being overweight small-caps, the bank said, investors were poised to benefit from favorable growth policies in the US and stronger growth. After the US announced its latest plan to escalate tariffs on Chinese goods, JPMorgan doubled down on its counsel.

"We continue to recommend small-caps as a 'catch-all trade' for its higher cyclical, reflation, and tax policy exposures, as well as lower sensitivity to ongoing risk," said Dubravko Lakos-Bujas, JPMorgan's head of US equity strategy, in a note on Tuesday.

"Importantly, domestic companies are more insulated from trade headlines and USD volatility."

Lakos-Bujas' recommendation for smaller domestic companies is pegged to the belief that stronger economic growth would benefit them more, even if it causes the inflation that some investors dread. Multinationals, he said, are exposed to negative economic revisions in the euro area and in emerging markets.

This year's tax cuts are another tailwind behind small-caps. Their effective tax rate fell to 22% from 32% in the first quarter, Lakos-Bujas said. That's almost double the benefit for large caps, where the effective rate is expected to fall to 21% from 27%, he said.

But small-cap companies don't have the all clear. From a technical standpoint, Lakos-Bujas said, the Russell 2000's outperformance over the S&P 500 is likely to slow down.

Also, sustained wage growth would hurt many of these smaller, labor-intensive companies, as would waning support for the Trump administration's economic agenda.

As it relates to trade, small-cap companies that import goods subject to tariffs could be hurt by rising costs, said Rich Sega, the global chief investment strategist at Conning, which has $122 billion in assets under management.

A trade war would also hurt companies that export products subject to Chinese import taxes.

"We'd rather not have it," Sega said. "But it's not enough to offset the very strong current and, I think, potential future benefits of tax reform, regulatory reform, and fiscal stimulus."

SEE ALSO: Morgan Stanley warns investors are in more danger of a market wreck than they realize and pinpoints one sector to stay safe

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2. Housing affordability in America is its worst in nearly a decade, and there's one clear culpritВс., 24 июня[−]

san francisco housing

  • Housing affordability hit its worst level in nearly a decade during the first quarter, according to Attom Data Solutions.
  • Attom measures affordability by comparing average wages to median home prices to determine the share of income people need to spend on housing.
  • Prospective buyers needed to shell out more because mortgage rates rose. The pace of home-price growth actually slowed, according to Attom.

Housing in the US has not been this unaffordable since property values were in free fall 10 years ago.

In the first quarter, affordability as measured by the average share of income needed to buy a median-priced house was at its worst since the third quarter of 2008, according to Attom Data Solutions. The firm's affordability index fell to 95, the lowest since it read at 86 nearly a decade ago.

This was not just because home prices were too high. In fact, the rate of appreciation slowed in the first quarter, according to Attom.

What really tipped the scale was the rise in mortgage rates, said Daren Blomquist, the senior vice president at Attom, in a report. Mortgage rates hit their highest level in seven years last month, and the national average 30-year fixed rate is now above 4.4%, according to A year ago, it was 3.8%.

And so, mortgage rates are up along with prices. Wages are rising, too, but not yet quickly enough to move the needle on affordability.

"Home-price appreciation continued to outpace wage growth, speeding up the affordability treadmill for prospective homebuyers even without the rise in mortgage rates," Blomquist said.

The recovery in home prices has been great for homeowners who lost value in the financial crisis. But unlike prices, homebuilding hasn't yet returned to precrisis levels, leading to a limited inventory of affordable houses. In some major cities including New York, developers have overbuilt in the luxury end of the market where it's more lucrative.

The median-priced home was unaffordable for people earning the average wage in 75% of US counties, Attom said. In San Francisco's Marin County, where affordability was worst, the average wage earner would have needed 133% of his or her income to buy a median-priced home. In Michigan's Wayne County, which includes Detroit, it was 14%.

The reason affordability worsened so much — higher mortgage rates — is a mixed bag in terms of what it means for the housing market.

That's because the decision to buy a home is not influenced solely by the level of interest rates. Buying a home is about more than just making an investment — for some it can be about fulfilling a lifelong dream, putting down roots, and leaving something tangible for future generations. And so, a few hundred dollars extra every month is unlikely to deter many first-time shoppers who have found their dream home.

Data compiled by Ellie Mae confirms this. The mortgage-software provider's most recent numbers, for May, showed that the share of loans taken out for buying homes (not for mortgage refinancing) hit a high not seen since record keeping began in 2011. Refinancing, however, has been on the decline, falling to a 17-year low in May as borrowing costs increased.

"While inventories remain tight, we're seeing an increasing percentage of purchase loans," said Jonathan Corr, the president and CEO of Ellie Mae.

SEE ALSO: California's housing market has reached a boiling point, and a typical home costs $600,000

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3. Here are the 26 top tech CEOs of 2018, according to the employees who work for them (AAPL, FB, GOOGL, MSFT)Вс., 24 июня[−]

Mark Zuckerberg

Despite a scandal-ridden year in Silicon Valley, there are still some tech workers who love where they work — and who they work for.

Glassdoor, an employee review site, conducted its annual Employee's Choice Awards, part of which includes a report on the top 100 CEOs to work for, based entirely on voluntary and anonymous employee feedback in the last year. Of those hundred, 26 of the top CEOs are specifically in tech, with 17 based in the San Francisco Bay Area.

One thing to note before we jump into the list: even though last year's list included one woman — Stitch Fix CEO Katrina Lake — this year's list is all men. That's largely because the tech industry is male-dominated. It may also be related to how studies have shown that employees generally review women leaders more harshly.

Other absences from this year's list include Jack Dorsey, CEO of both Square and Twitter, and Uber CEO Dara Khosrowshahi, who made the list last year as the then-CEO of Expedia.

Out of Glassdoor's report of 100 Top CEOs of 2018, take a look to see where tech CEOs placed.

SEE ALSO: The 27 best tech CEOs, according to employees

26. Workday — Aneel Bhusri

91% approval rating

#97 out of the top 100 CEOs

#26 among tech CEOs

Workday provides software for human resources and financial systems management.

25. Apple — Tim Cook

91% approval rating

#96 out of the top 100 CEOs

#25 among tech CEOs

Apple produces the iPhone, iPad, and Mac — some of the most successful consumer electronics products in the world.

Cook actually dropped 43 spots on the top 100 since last year, marking the single biggest drop of a tech CEO. Still, this is Cook's sixth consecutive appearance on the list.

24. VMware — Pat Gelsinger

92% approval rating

#78 out of the top 100 CEOs

#24 among tech CEOs

VMware, owned by Dell, provides cloud computing and virtualization software for developers.

See the rest of the story at Business Insider

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4. The inside story of how a $730 billion investment industry was born from the ashes of the tech bubbleВс., 24 июня[−]

2000 new years

  • Rob Arnott, the chairman and chief executive of the Pimco subadviser Research Affiliates LLC, is one of the most influential minds in investing, having pioneered a technique that has grown into a $730 billion industry.
  • In an exclusive interview with Business Insider, Arnott describes the origin of his world-famous investment technique, which grew out of the ashes of the tech bubble.

The tech bubble collapse that rocked global markets at the turn of the millennium inspired a great deal of soul-searching.

Investors were forced to rummage through the rubble, looking desperately for any insights around what went wrong with hopes of avoiding it the next time.

And while much of it was fruitless, one little-known interaction occurred that would end up permanently shaping the world of investing.

At the center of this tale is Rob Arnott, the chairman and chief executive of the Pimco subadviser Research Affiliates LLC, where he advises on more than $200 billion. Known for his efforts applying quantitative analysis to investing, Arnott had, up to that point, made a career out of challenging the status quo.

Considering that mandate, it should come as little surprise that Arnott's great investing epiphany came on the heels of a man-made market disaster that featured legions of investors piling into the same doomed trades.

The self-described "aha moment" hit Arnott while he was talking to a friend who served on the board of the New York state pension. The acquaintance was lamenting what he viewed as a flawed indexing system that allowed the benchmark S&P 500 to become too beholden to mega-cap technology companies at the peak of the bubble.

After all, the component weightings in gauges like the S&P 500 are traditionally decided by relative market capitalization. So as a company's value increases, its influence on the underlying index does as well.

"He was horrified that, in the tech bubble, more and more money was being indexed to the S&P 500," Arnott told Business Insider during a recent meeting. "That ensured that whatever was the most extravagantly priced stock had a big weight in your portfolio. And when the tech bubble crashed, in his view, cap weighting demolished a lot of wealth. He thought there had to be another way."

And with that, Arnott was off to the races.

A groundbreaking investment strategy is born

Arnott's conversation with his friend wasn't the first time he'd thought about the flawed nature of weighting indexes by market cap. But it was the catalyst that ultimately made him decide to pursue an alternative method.

"I'd thought for a long time that weighting by market cap had that Achilles' heel or structural flaw," he said. "Finance theory says never mind, if the market is efficient, then that's the right way to do things. But that's a huge if."

He started by instead weighting indexes according to revenue — and the results were jarring. With the help of Jason Hsu, his first employee at the newly launched Research Affiliates, Arnott found that the sales-weighting strategy had beaten its market-cap counterpart by 250 basis points going back 30 years.

Curious as ever, Arnott then started weighting by any number of factors, including dividend yield, cash flow, and number of employees. He was initially shocked when they all worked about equally but then quickly formed a theory around why that was the case.

Arnott poured his findings into a research paper titled " Fundamental Indexation," which, ironically, argued that performance had nothing to do with fundamentals. He surmised that the true key lay within the practice of contra-trading, which offers investors the same alpha no matter what their anchor is for rebalancing their portfolio.

That is, of course, only if you're abiding by the practice of fundamental indexing, which involves buying high and selling low and then using that rebalancing as a source of alpha. After that, any time the link between the price of a stock and its index weighting is broken, the strategy sells on strength and buys on weakness.

Before long, the firm Towers Watson had picked up on the technique and given it a catchy new moniker: smart beta. Armed with a name that essentially markets itself, the strategy has morphed into a whole new investing business, with more than $730 billion wrapped up in products worldwide.

So while smart beta started as a contrarian challenge to a deeply entrenched investment practice, it has taken on a new life of its own. And that has given rise to a new host of problems, such as investors who dabble but don't fully understand what they're buying.

"Most of the practitioners of smart beta still don't realize, to this day, that they're enjoying the benefits of a rebalancing alpha," Arnott said. "And if you don't realize that, you're going to be seduced into doing all sorts of stupid things to try and make your process better, which will probably make it worse."

He continued: "That was an aha moment when I realized that. You could use darts or the number of board members who like to wear bow ties when weighting a portfolio, as long as it doesn't include price. That was kind of what launched the smart-beta revolution."

SEE ALSO: One of investing's most influential pioneers just made a bold prediction about where tech stocks will be in 10 years — and it's not pretty for the likes of Apple and Facebook

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5. 'Jurassic World: Fallen Kingdom' takes in an impressive $150 million at the box office — 2nd best opening all-time for UniversalВс., 24 июня[−]

jurassic world fallen kingdom

  • "Jurassic World: Fallen Kingdom" earned a $150 million opening weekend, domestically.
  • That's the second-best ever opening for a Universal release.

Three years after "Jurassic World" gave Universal a surprising record-breaking opening weekend, the follow-up, "Jurassic World: Fallen Kingdom," took in an impressive $150 million at the domestic box office over the weekend, according to

No one in Hollywood expected the fifth chapter in the "Jurassic World" franchise to perform the way 2015's "Jurassic World" did, but the weekend performance did exceed industry projections that the movie would earn between $130 million to $140 million.

The $150 million tally is the second best opening ever for a Universal release, trailing only "Jurassic World" ($208.8 million).

This adds to the movie's already very strong performance overseas.

Having taken in over $560 million abroad since it opened in many regions two weeks ago — including China where it had an over $100 million weekend — "Fallen Kingdom" took the unconventional route from most blockbusters by opening internationally before its domestic run.

The move certainly seems to have paid off — the movie's worldwide gross is now over $700 million.

And you can already mark your calendars for the next "Jurassic" movie. Universal has announced "Jurassic World 3" will open June 11, 2021.

"Fallen Kingdom" is just the latest big opening for a big summer movie release, something that the industry lacked last year. And because the major movies are performing as they are supposed to, the 2018 box office is looking strong.

Box office profits are up 6% from this time last year, according to CNN.

This is the combination of summer blockbusters performing as expected (so far) — "Avengers: Infinity War," "Deadpool 2," "Incredibles 2" — and big performers from earlier this year — "Black Panther," "Ready Player One," plus the surprise of the year "A Quiet Place."

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DON'T MISS: 'Jurassic World: Fallen Kingdom' takes itself way too seriously, and that dampens the fun

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6. Trump's 'Space Force' could fuel a new $1 trillion economy, Morgan Stanley saysВс., 24 июня[−]

space shuttle

  • President Donald Trump's proposed " Space Force" could help fuel the $1 trillion intergalactic economy, Morgan Stanley says.
  • The bank is tracking 100 private companies poised to profit from interstellar industries.

If President Donald Trump successfully organizes his so-called Space Force, it could speed up investment in what Morgan Stanley sees as the next trillion-dollar economy.

In a note to clients Friday, the bank doubled down on its intergalactic thesis from last October, saying the Space Force "could address critical vulnerabilities in national security, raising investor awareness in the formation of what we see as the next trillion-dollar economy."

Morgan Stanley has already identified 20 stocks staking their place in the space race, and says it's monitoring 100 other private companies across sectors including satellite internet, rockets, space tourism, and asteroid mining as the push to pioneer this new frontier heats up.

"Our conversations with various actors (current and retired) in the US government, military, and intelligence communities overwhelmingly indicate that space is an area where we will see significant development," a team of analysts led by Adam Jonas, the bank's autos analyst, wrote in Friday's note. "This development could enhance US technological leadership and address vulnerabilities in surveillance, mission deployment, cyber, and AI."

Space is already a $350 billion economy, or roughly half a percent of the world's GDP, the bank estimates. And as more investments pour into technologies like reusable rockets that make space exploration cheaper, that economy could grow to $1 trillion, especially as countries recognize the need for a space presence to maintain national security.

Still, though, it's not clear how exactly the "Space Force" might come about — or even which branch of the current military it may fall under — but Morgan Stanley says it could actually be a net positive for the Department of Defense.

"Based on conversations with some Washington insiders, establishing a Space Force as a standalone military branch, while potentially contentious, could be overall beneficial for the US Defense Department," said Morgan Stanley. "That said, the President must now garner the support of Congress to move on the initiative, through both funding and authorization."

That last part may prove difficult, but the President seemed committed to the idea when he signed a "space policy directive" last week.

"It is not enough to merely have an American presence in space," President Trump said at the time. "We must have American dominance in space. We are going to have the Air Force, and we are going to have the Space Force, separate but equal."

SEE ALSO: MORGAN STANLEY: Here are 20 companies that are best exposed to the growing space economy

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7. The bank for central banks is blaring the siren on a new debt crisis that could cause a long and painful recessionВс., 24 июня[−]

traders yelling shouting phones

  • The Bank for International Settlements, nicknamed the bank for central bankers, said in a report that the ballooning levels of public and private debt are creating a 'trap' that would be hard to escape.
  • Although higher leverage can boost growth in the short run, it comes at the cost of deeper and longer recessions down the road, the BIS said in its 2018 annual economic report.
  • It identified specific pockets of the market that leverage has made vulnerable, including the US commercial-real-estate market.

Ten years after a credit crisis drowned the global economy, central bankers are worried about debt.

The Bank for International Settlements, dubbed the bank for central bankers, said in its annual economic report for 2018 that the growing levels of government, corporate, and consumer borrowing create a "debt trap" that policy may not easily untangle down the road. Global debt across governments, nonfinancial corporations and households surpassed $160 trillion as at the end of 2017, according to the BIS.

The BIS placed some of the responsibility at the feet of central banks. It's true that low interest rates and other policies, some unconventional, helped many economies recover after the financial crisis. But therein lies the trap: because growth and borrowing have become dependent on low rates, the economy, and financial valuations, are more sensitive to higher interest rates. This in turn makes it more difficult for central banks to raise rates, encouraging even more borrowing, the BIS said.

The report noted that since the financial crisis, there has been a continuous rise of public and private debt relative to gross domestic product. "Indeed, a growing body of studies documents how higher leverage, in both the private and public sectors, can boost growth in the short run, but at the cost of lower growth on average, including deeper and prolonged recessions, in the future," the BIS said.

Screen Shot 2018 06 18 at 8.18.06 AM

The BIS looked into how the financial and business cycles interact with the growth of debt. In the good times, like now, leverage boosts asset prices and helps economies grow. However, everyone from households to companies has to face a payback reckoning that gets worse when the cycle turns.

"It is evident [in the chart below] that the downswings of the financial cycle — characterised by high debt service, deleveraging and falling asset prices — are closely associated with the economic downturns that have occurred in these countries since the mid-1980s, with some of these coinciding with serious financial strains," the BIS said.

Screen Shot 2018 06 22 at 10.56.14 AM

Most vulnerable areas

The BIS further pinpointed a number of areas that are most at risk as debt levels rise. It prefaced this by noting that delicate pockets of the financial system exist even though the economy is still in an upswing.

Screen Shot 2018 06 22 at 11.10.02 AMFirst is nonfinancial corporate debt in the US and UK, especially, and in France and other European countries to a lesser extent.

"In the United States, in particular, corporate leverage today is at its highest level since the beginning of the millennium," the BIS said, adding that most investment-grade companies are vulnerable to being downgraded.

The BIS also flagged US commercial real estate, where prices have recovered close to pre-crisis highs.

"Values there seem particularly vulnerable to rising long-term yields," the bank said.

Thirdly, the BIS noted the level of non-bank, foreign-currency borrowing in emerging-market economies, which has doubled since 2008 and stands at $36 trillion. The growth rate of this debt almost tripled last year as the dollar weakened, but the economies are now exposed to a stronger dollar and a reversal of investors' appetite to take risk.

"While the global economy has made substantial progress post-crisis and near-term prospects are positive, the path ahead is a narrow one," the BIS said. "The risks highlight the importance of taking advantage of the current upswing to implement the necessary measures to put the expansion on a stronger footing and to rebuild policy buffers."

SEE ALSO: JPMorgan identifies a 'catch-all trade' that will profit from the biggest issues confronting investors — including a trade war

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8. From denial to despair: Cambridge Analytica insiders describe the hectic final weeks at the embattled companyВс., 24 июня[−]

Cambridge Analytica

  • Cambridge Analytica staffers did not believe the allegations about the company until almost the very end.
  • Two Cambridge Analytica insiders that Business Insider spoke to describe the final months at the firm before it filed for bankruptcy.
  • The company's management held a constant stream of "town hall" meetings with staffers to wave off the news reports and allegations, and staffers took the leaders at their word.

When Cambridge Analytica’s London offices were first raided by government authorities, the mood among employees was surprisingly cheerful.

Cambridge Analytica had become publicly embroiled in a media firestorm days earlier as news reports revealed how it sought to manipulate American and British voters by using the personal data of more than 87 million Facebook users.

But there was a sense of relief among Cambridge Analytica staffers when they realized the official visitors who'd swarmed their workplace belonged to the Information Commissioner's Office — the agency tasked with protecting data privacy in the UK — rather than being “real” investigators. Staffers made jokes about the seemingly unthreatening and bumbling nature of their visitors, taking great pleasure in pointing out various “ICO fails.”

"It was quite fun because we went through the office and saw all the fails the ICO had," one former Cambridge Analytica employee recalls. "Like, they took our servers but couldn’t get into them, because we used full disk encryption."

The attitude was not so much temerity, as simple naiveté.

Business Insider spoke to two Cambridge Analytica employees who were at the company during the final days before it declared bankruptcy and shut down. Both employees, who wished to remain anonymous, described a culture in which rank-and-file staffers remained surprisingly loyal through the end, accepting the word of their managers as gospel and dismissing unwelcome media reports.

"Everyone thought we could ride this out," the other employee said.

Internal 'town hall' meetings dismissing the news reports became an almost daily occurrence

Facebook Zuckerberg Privacy Hearing Day 2 GettyThe week before the initial story broke, executives gathered employees for an "emergency town hall meeting." In the meeting, Cambridge Analytica's leadership warned that a "disgruntled former employee" had talked to the media. But they told everyone not to worry; the story wasn't going to be a big deal, according to an employee at the meeting.

As the controversy around Cambridge Analytica grew, internal town hall meetings became the norm, both employees said. After each new story about the company was published — which at some points was daily — executives would gather everyone to explain what the latest accusations were and how Cambridge Analytica was going to defend itself.

The narrative executives told employees was a version of the company's public defense: the media was out to get them, Cambridge Analytica did nothing wrong.

The company's ties to the Trump campaign and to high profile conservatives like Steve Bannon provided plenty of reason for a political motive. Many employees even identified as left-wing or progressive, one employee said, and rationalized the political work they were doing as part of the job. Especially those who didn't work with political clients, the firm's links to Bannon, Republican mega-donors Robert and Rebekah Mercer, the Trump and Cruz campaigns, and the Leave EU campaign seemed distant to them.

Indeed, even as a series of emails, witnesses, and other documents surfaced that seemed to corroborate the initial news reports, most rank and file employees believed what their superiors were telling them. There were some rumblings about quitting, but most of the insiders, in words and actions, remained faithful.

Employees felt especially confident following Facebook CEO Mark Zuckerberg's testimony before the US Congress and British Parliament. Employees clung to the fact that several politicians seemed to have a limited understanding of the technology behind Facebook and Cambridge Analytica.

The undercover videos were the turning point

(L R) Turnbull and Nix Cambridge AnalyticaThe mood changed quickly after British broadcaster Channel 4 released a series of undercover videos featuring CEO Alexander Nix. The video appeared to show Nix describing controversial tactics for landing potential clients and manipulating elections, including entrapping political opponents with sex workers.

While the Facebook user data scandal was seen as smoke and mirrors by Cambridge staffers, the Channel 4 videos gave employees physical evidence of the data firm's alleged improprieties. The day the videos were released, some employees were watching them in the office and discussions of leaving ramped up.

"No one wanted to work for him anymore," one employee said, referring to Nix.

The fallout from the videos toppled Nix, who told employees himself during a town hall meeting that he had been removed by the company's board of directors. Since the meeting took place at the end of the day in London, dejected employees went straight home.

Still, employees hoped that the media storm would eventually die down with Nix out of the picture, even as the firm's business was evaporating quickly.

Trying to save the business

Almost immediately after the scandal became public, nearly all of the firm's commercial clients — which included New York University’s Langone hospital, The Economist, and The Financial Times, according to NBC News — left immediately.

About a dozen clients stayed with Cambridge Analytica and employees continued working for them as best they could. But their ability was hampered because Facebook had cut off the company's access to its platform, so no one was able to place targeted Facebook ads. The company tried to contact Facebook about the issue, but no one at the social media giant was returning any phone calls.

"Facebook and Google practically have a duopoly on digital advertising right now. If one of them won't let you advertise for your clients, you got both arms tied behind you back. There's no way you can function," an employee said.

Cambridge Analytica office

Engineers couldn't perform basic tasks because data management tools like Liveramp and Lotame also cut off the company's access to their services.

The firm briefly considered spinning off its commercial business and ditching political work altogether, but the idea never took.

Ultimately, though, "very few" people left Cambridge Analytica before it shut down and declared bankruptcy in May. But the exit that had the most impact was Alexander Tayler, Cambridge Analytica's chief data officer. After Nix was forced to resign, Tayler stepped in as acting CEO. But to everyone's shock, he stepped down weeks later and eventually left Cambridge Analytica altogether. Employees trusted Tayler, and they thought if anyone could save Cambridge Analytica, it would be him.

Tayler, who is now seeking work as a consultant about issues related to data privacy, has not responded to requests for comment from Business Insider.

The end of Cambridge Analytica was announced to employees in a town hall meeting, which had been rescheduled and pushed back several times. By that point, employees were either unmotivated to work or found that working was nearly impossible with all the distractions. Some were already looking for new jobs.

One of the former employees at the meeting recalled that Julian Wheatland, the company's latest acting CEO, began the meeting by talking about the history of the company. At that point, the employee said, it was obvious what was coming next.

SEE ALSO: Net neutrality rules are now dead. Here's what that means for you, and what happens next

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9. Goldman Sachs has hired a rising star from Moelis who carved out a business sourcing deals from fitness companies like Flywheel and Barry's Bootcamp (GS, MC)Вс., 24 июня[−]

Aarti Kapoor Moelis

  • Goldman Sachs has hired a rising star from Moelis & Company to its consumer and retail investment banking practice.
  • Aarti Kapoor, who carved out a business covering high-growth fitness companies like Flywheel and Barry's Bootcamp, will join Goldman as a vice president in August.
  • Kapoor is credited with founding and running Moelis' health, wellness, and lifestyle investment banking coverage and was included on Business Insider's Rising Stars on Wall Street list in 2017.

Goldman Sachs has hired a rising investment banking star from Moelis & Company who specializes in working with companies in the health and wellness industry.

Aarti Kapoor, 32, will join Goldman's consumer and retail investment banking group, according to people familiar with the matter. She spent nearly nine years at Moelis, according to her LinkedIn profile.

A Goldman Sachs spokesman confirmed Kapoor would be joining the firm as a vice president in August. A Moelis spokesman declined to comment.

Kapoor joined Moelis as a junior banker in 2009 and leaves as an executive director, which like the VP title at Goldman is one a level below managing director. At Moelis she carved out a niche early on with high-growth health, wellness, and lifestyle brands, sourcing deals with companies like Flywheel, Barry's Bootcamp, and Vega, a plant-based sports supplement maker that sold for $550 million.

She is credited with founding and running the firm's health, wellness, and lifestyle business and was included on Business Insider's Rising Stars on Wall Street list in 2017.

Goldman has been chasing after deals from such middle-market and high-growth companies from regions across America as part of a goal to cover more than 1,000 new companies and add $500 million in new investment-banking revenue.

The bank's consumer and retail practice is better known, however, for advising on high-profile mergers and acquisitions, which in 2018 includes the $18.7 billion Keurig-Dr. Pepper merger, Albertsons' $7.1 billion acquisition of Rite Aid, and General Mills' $8 billion buyout of Blue Buffalo Pet Products.

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10. These 25 companies are best positioned to rake in big profits as robots and AI take over, SocGen saysСб., 23 июня[−]

robot waiter restaurant

  • The market for artificial intelligence will grow to generate $59.75 billion in revenues by 2025, Société Générale forecasts.
  • The firm created a Rise of the Robots index with companies that are best positioned to profit from this growth.
  • In the selection process, the analysts considered companies that invest heavily in research and development, those with a healthy return on invested capital, and sales growth.

The robots won't take over every job, but they're already transforming the world.

From self-driving cars to lab-grown meat, humans are designing robots to make our lives easier by speeding up and improving tasks we've always done.

In fact, in a distant future, Société Générale sees artificial intelligence board members and politicians, and implantable phones as some of the possibilities.

But bringing it back to the present day, the firm has identified investable companies that are best positioned to benefit from the growth of AI in their respective industries. AI will grow to rake in $59.75 billion market in revenues by 2025, SocGen forecasts.

"AI raises concerns about security and privacy, and especially about the future of jobs," Daniel Fermon, the head of thematic research, said in a note on Tuesday.

"However, it also offers the potential for new solutions to some of our most pressing global problems, in areas ranging from climate change to the aging of the population ... Whatever the outcome, AI is happening, creating potential investment opportunities as the field advances."

The list below highlights the top companies in SocGen's Rise of the Robots index. In the selection process, the analysts considered companies that invest heavily in research and development, which they saw as essential to leading in the fields of AI and robotics. They also selected companies with a healthy return on invested capital and sales growth.

SEE ALSO: The world's hottest tech companies are now worth more than $5 trillion, and they could be pointing out the next big bubble

NXP Semiconductors

Ticker: NXPI

Country: Netherlands

Sector: Semiconductors

R&D/sales: 16.79%

Return on invested capital: 6.26%

Three-year sales growth: 20.39%

Source: SocGen

Cypress Semiconductor Corp.

Ticker: CY

Country: US

Sector: Semiconductors

R&D/sales: 15.34%

Return on invested capital: -2.62%

Three-year sales growth: 54.09%

Source: SocGen

IPG Photonics

Ticker: IPGP

Country: US

Sector: Electronic Manufacturing Services

R&D/sales: 7.16%

Return on invested capital: 18.94%

Three-year sales growth: 22.91%

Source: SocGen

See the rest of the story at Business Insider

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11. 'It was true for tulips, junk bonds, and mortgage-backed securities, and now crypto': There's a big shakeup happening in the ICO market, and it should be keeping investors up at nightСб., 23 июня[−]

Chris Concannon

  • The market for initial coin offerings is about to witness a two-part regulatory reckoning, according to Cboe president Chris Concannon.
  • The veteran trader said if such offerings are deemed as unregistered securities, then the SEC will go after industry participants and litigation will rise.
  • Crypto startups have raised billions of dollars via the fundraising method.

Chris Concannon, the president of Cboe Global Markets, is one of Wall Street's biggest crypto advocates. But the trading veteran thinks investors should lay awake at night worrying about the uncertainty hanging over the market for initial coin offerings, the popular crypto crowdfunding method.

"The reckoning will come in two waves," Concannon said in an interview with Business Insider. First, the SEC will go after ICO market participants. Then, class-action lawsuits against the teams behind ICO projects will surge.

Crypto investors cheered when William Hinman, the SEC's director of corporate finance, said last week that ether transactions would not fall under the agency's regulatory purview. Still, Hinman's remarks did not give the greenlight for companies to run an ICO, which enables a company to issue its own token in exchange for ether or bitcoin (which ideally would go towards building a product or business).

The market, which is known for its fair share of both fraud and big dreams, has allowed some tech startups to raise billions of dollars from a wide-spectrum of investors. In total, more than $7 billion has been raised via the fundraising method in 2018, according to data from Token Report. ICOs are traded on dozens of exchanges across the world and are popular investments among the more than 200 crypto hedge funds. Pantera Capital, one of the largest crypto investors, has two ICO funds, for instance.

If the SEC ultimately decides that the lion share of ICOs are unregistered securities, then many players in the market could find themselves in a legal quagmire.

"The actual party that offered the unregistered coin, they could have been involved in issuing an unregistered security," Concannon said. "Anyone who sold that off could be deemed an unregistered underwriter."

To be clear, the SEC could come up with an entirely new designation for ICOs. And it's not clear to some market observers whether the agency would retroactively go after all market participants. Robert Hockett, a professor of financial regulation at Cornell University, said you would likely only see the SEC take legal action in certain circumstances.

"I don't think it is the case that people involved in the business are going to be prosecuted against as if they have been violating the law," Hockett said. "But there is a little bit of a room for exception with something particularly egregious."

That could mean a company misled investors about a certain offering or claimed that it would never fall under the auspices of the SEC.

Either way, the story doesn't change for investors. If the SEC deems ICOs as unregistered securities, then their holdings would be rendered valueless. This, according to Concannon, would trigger the second wave of reckoning.

"If you sold someone an unregistered security you are liable to them if they decide to take them to court," Concannon said.

The market has seen a number of class-action lawsuits. Business litigation firm Silver Miller in late 2017 filed a class-action suit against Monkey Capital, a crypto hedge fund. The firm alleges the fund promoted its ICO that violated US securities law. Silver Miller also has pending cases against crypto exchanges Kraken and Coinbase.

Law firm Polsinelli, which is advising clients to approach the ICO market cautiously, said it has "only likely begun to see the beginning of class action lawsuits filed relating to blockchain-related companies or companies that participated in ICOs."

Some of those suits could have merit, said Cornell's Hockett.

"If they can prove investors were defrauded and misled by people who were better suited to understand the regulatory framework, but still instilled in investors a — no pun intended — false sense of security, then some suits would have merit."

For Hockett, the move indicates a shift in the market that is not without historical precedent. Crypto, he says, is moving out of the "Wild West" phase into a "regulatory scrutiny" phase, which in the short term will see the rise of funds to launch class-actions and increased litigation. But in the long term, it will see a cleansing of the market.

"It is a legal life cycle of every new asset that becomes highly popular," he said. "It was true for tulips, junk bonds, and mortgage-backed securities, and now crypto."

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12. Global markets are flashing a new ominous signal that investors are bracing for the worstСб., 23 июня[−]


  • An increasing number of experts across Wall Street are warning that the ongoing market and economic cycles are entering their final stages.
  • One statistic compiled by Morgan Stanley suggests investors are already getting more risk averse, which could usher in the end of the cycle even more quickly than previously thought.

As the prospect of a trade war threatens to divide the world, a unified front is forming in global markets. It's just not the type any risk-seeking investor wants to see.

A Morgan Stanley gauge that monitors the correlation between asset classes and geographic regions has spiked to its highest level since 2016. This implies that financial assets around the world are trading more in lockstep than at any other point in recent memory.

6 21 18 global correlations COTD

Perhaps more important for those seeking market signals, it also means investors are shifting into risk-off mode — one that could be setting in for the long term. And it's a definite warning signal for the risk-hungry traders still scouring the landscape for yield.

Tim Emmott, the executive director at Olivetree Financial, takes it a step further by suggesting that cautious investors are bracing for the possibility of a market meltdown.

"The fact that this index is trending higher currently could well be the true signal for market players to realize that current multi-asset moves toward risk aversion may be more than short-term," he wrote in a note reviewed by Bloomberg. "The move in correlation here may be the canary in the coalmine for the medium-term trajectory of real systemic risk to markets."

To fully appreciate what's at stake as global cross-asset correlations surge, consider that tandem moves in stocks and bonds can throw portfolios out of whack by exacerbating volatility. This is particularly true for the models used by risk-parity and balanced mutual funds, which are designed to de-lever when price swings spike, according to Nikolaos Panigirtzoglou, a global market strategist at JPMorgan.

As if that's not worrisome enough, Binky Chadha, the chief global strategist at Deutsche Bank, recently pointed out that lockstep moves in major asset classes could portend contagion-driven weakness.

"The tight correlation in the moves across the major asset classes (oil up, dollar down, equities and bond yields up) suggests a pullback in one for idiosyncratic reasons would likely spill over to the others," he wrote in a client note earlier this year.

To Keith Parker, the chief US equity strategist at UBS, rising cross-asset correlations can be a sign that an economic expansion has entered its final stage. He told Business Insider back in March that he was closely watching the relationship between US stocks and bonds for recessionary signals.

In the end, if today's expansion is trudging through its final innings, it would seem to be a prudent decision for investors to start leaning toward risk-off positions.

But is it really time to pack it in and flee to safety? Any investor you ask is likely to suggest a different timeline for derisking. Some might urge you to seek shelter immediately, while others would be incredulous at the prospect of missing another leg of strength.

Regardless of where on the spectrum you fall, you'd be best advised to keep an eye on all these disparate elements. The signal you're looking for is probably there somewhere — and half the battle is knowing where to look.

SEE ALSO: An investing legend shares the inside story of how he helped build a $730 billion industry from the ashes of the tech bubble

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13. There's confusion over whether the Trump administration secretly promised Apple that iPhones wouldn't be caught in the cross fire of a trade war with China (AAPL)Сб., 23 июня[−]

Tim Cook Trump

  • Apple could be one of the biggest losers in a trade war between the United States and China.
  • The New York Times reported Monday that the Trump administration had told Apple CEO Tim Cook that no tariffs would be placed on iPhones.
  • But a top White House trade adviser reportedly said he didn't have any knowledge of such an exception.

There are few companies with more to lose than Apple in a trade war between the United States and China.

The world's most valuable publicly traded company does nearly all of its manufacturing and assembly in China, the culmination of a long and complicated electronics supply chain that stretches around the world and ends with the Chinese-made iPhone you may be reading this story on.

So it's no surprise that the massive tariffs President Donald Trump has threatened and China's response could lead to a trade war that would cripple the iPhone company, and Apple CEO Tim Cook has been working behind the scenes with both governments to make sure it stays out of the crossfire.

As part of a closer look at how Apple has navigated the impending trade war, The New York Times on Monday reported that the Trump administration had told Cook that no tariffs would be placed on iPhones.

But a top White House trade adviser denied knowledge of any iPhone trade exemption in a conference call with reporters on Tuesday, according to Bloomberg. "With respect to Tim Cook and exceptions, I have no knowledge or comment about that," Peter Navarro, the director of the White House's National Trade Council, reportedly said.

The Times in Monday's report named Navarro as a trade official Cook tries to avoid, so it's possible he hasn't been told of an Apple-related trade decision behind closed doors. Cook reportedly has had better luck speaking with Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, and Larry Kudlow, the director of the White House's National Economic Council.

Cook maintains an open line of communication with Trump, and The Times said he visited the White House last month. Apple announced earlier this year that it planned to spend $350 billion in the United States over the next five years, news the Trump administration used to trumpet its economic policy.

"But I felt that tariffs were not the right approach there," Cook said in an interview with the financier David Rubenstein published earlier this month, adding that he showed Trump "some more analytical kinds of things to demonstrate why."

The White House has not made a public statement exempting Apple from tariffs, and China could always decide to place tariffs on materials that are used to make Apple's devices or make life difficult for Apple in other ways, such as by using bureaucracy to slow down shipments.

Apple and the White House didn't respond to emails. So it remains an open question whether Apple's charm offensive on the White House got the iPhone company special treatment from the Trump administration.

Treasury Secretary Steven Mnuchin, left, with Apple CEO Tim Cook

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14. Elon Musk promised a Tesla 'alien dreadnought' factory — but what we got was a tent (TSLA)Сб., 23 июня[−]

Elon Musk

About a week ago, the world learned that Tesla is building some of its Model 3 vehicles not actually inside its factory in Fremont, CA, but rather under what CEO Elon Musk called a " tent."

The tent — in truth, a large temporary structure — houses a general assembly production line and is located adjacent to the plant. It's handing the company's $78,000 dual-motor, high-performance Model 3's, the most expensive versions of the vehicle.

The $35,000 base Model 3's, intended to be Tesla's car for the masses, is seemingly a long way off.

The goal behind the tent is apparently twofold. Tesla has a single general assembly line for its Model S sedan and Model X SUV, and two parallel lines for Model 3, all inside its factory. Lacking enough physical space in what is by the standards of the auto industry a large plant, Tesla looked to the fresh air of the East Bay for a fourth Model 3 line.

The company is pushing hard to achieve a weekly Model 3 production target of 5,000 units, and the existing capacity under Fremont's roof wasn't adequate. It's worth pointing out that the Model 3 line was supposed to be an initial phase of the transformation of Tesla's manufacturing systems, factories into what Musk termed an "alien dreadnought" — some so thoroughly automated that it would be unrecognizable to auto industry veterans.

Model 3 production has struggled from the start, after a launch last July. Production "bottlenecks," as Tesla labeled them, at the company's Nevada battery factory and later automated assembly snafus in Fremont led the company to abandon its robot dreams an return to using good old-fashioned humans. The pace has been intense: Tesla has been running 24/7 on three shifts the get the Model 3 on track.

Tesla must post a profit — or bust?

Tesla Model 3

Part two of the tent maneuver involves Tesla's financials. Tesla has been burning a staggering amount of cash and has upped its annual losses to record levels. It's costing over $1 billion per quarter to operate — but the company has less than $3 billion in the bank.

Yet Musk has said that Tesla will be cash-flow-positive and profitable in the second half of 2018 and require no new capital raises, either through issuing new equity or debt. Consequently, Tesla has been laying off 9% of its workforce, submitting anything more than $1 million in spending for Musk's personal approval, and throttling back its expenses while producing only the highest-ticket Model 3s.

With the second quarter about to close, the third quarter has to yield some massive revenues to overcome Tesla's monumental costs.

In that context, the tent is either heroic or desperate, depending on your point of view.

The alien dreadnought plan is evidently in a shambles, but although Tesla shares have been hammered in 2018 after a huge rally in 2017, the stock price remains around $350 and market cap is larger than that of Ford or Fiat Chrysler Automobiles.

According to Musk, the tent and the new general-assembly line — presumably consisting of several million bucks in precision, computerized technology — went from concrete slab to pushing sheet metal in three weeks. So there's the heroism.

Tesla's learning curve is steep

Tesla Detroit sales vs market cap

"I'm sure it's unique and unprecedented," Karl Brauer, Executive Publisher for Autotrader and Kelley Blue Book, told Business Insider in a phone interview.

"But that’s their world — Tesla’s entire company is the Fremont factory," he added. "Tesla is still steep in the learning curve. They're constantly reassessing how well things are working. So if they're out of space, it all make sense if you factor that in."

But Brauer also said that what will be more telling as far as Tesla's future goes is how long the company sticks with general assembly in a temporary space. No other major automaker would attempt anything similar; as Brauer noted, they would typically establish the manufacturing capacity first and only then build the vehicles.

Bob Lutz — a former auto-industry executive at General Motors, Ford, and Chrysler — has been highly critical of Tesla and offering less optimistic point of view.

"Elon is desperate," he said in an email. "He realizes‎ that his (damaged) credibility hinges on his ability to produce 5,000 Model 3s per week. He'll do anything to get there."

Lutz said that a "quickie manual assembly line" in a tent is not business-as-usual in the auto industry. And he suggested that Tesla's hours-per-car expenditure, around 14-16 for a typical compact vehicle, have to be "off the charts."

That doesn't mean Musk won't get Tesla to post a result in the black for the second half.

"As he skims off the layer of devoted disciples who will pay $60,000 for a $30,000 compact, he will probably still have a good variable margin and may even — by hook, crook, creative accounting, expense deferral, etc. — manage to eke out a temporary profit in the third quarter, which will soon evaporate again," Lutz said.

A million miles from an alien dreadnought

tesla factory

I've written a lot lately about how what's going on at Tesla looks nothing like anything I've ever seen in my years of covering car companies. The obsessive scrutiny of the Model 3's rollout, with everybody and his brother and second cousin speculating on the vehicle count, is in itself something I've honestly never even thought about before. Usually, when a carmaker says they're going to start selling a new vehicle, you assume that in short order they'll match production with demand and the factories will start humming.

Even in that context, the tent is sort of a bridge too far. In truth, I've admired Musk's moxie: You gotta do what you gotta do. On the other hand, there is an amateurish element to Tesla's current predicament that could easily be solved by asking for some help. With 400,000 pre-orders for the Model 3 in the books, several contract manufacturers in the industry would be glad to lend an assist — and customers would get their cars.

What the tent really shows us is how distant we've gotten from Musk's initial ambition for Tesla to deliver the first significant advancement in manufacturing since the vaunted Toyota Production System (TPS) was developed in the 1970s and 1980s (and ironically honed for General Motors when GM and Toyota jointed operated Tesla's factory, when it was known as NUMMI).

There's some karmic payback on tap for Musk: he scoffed at TPS on an earnings call earlier this year. He later started talking about the "Tesla Production System" and insisted that it would be Tesla's biggest ultimate contribution to the future.

The alien dreadnought might still come to pass, if Tesla's can ride out its latest self-inflicted crisis. A new factory in Shanghai, China could be announced later this year and fulfill the dreadnought dream. But for now, Tesla is building very expensive all-electric vehicles in a giant tent, and that should give even the most ardent boosters of the company serious pause.

Business-as-usual in the auto industry might be boring to Musk. But at least nobody has to go on an industrial-grade camping trip to make cars.

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15. Galaxy, the crypto-bank founded by Mike Novogratz, is investing hundreds of millions of dollars in projects that'll lure Wall Street to bitcoinСб., 23 июня[−]

Mike Novogratz

  • Michael Novogratz's merchant bank Galaxy Digital has access to hundreds of millions of dollars to invest in crypto companies.
  • Its venture arm is eyeing companies that are building infrastructure solutions to lure Wall Street to the market for digital coins.

Famed hedge funder-turned-crypto enthusiast Mike Novogratz launched merchant bank Galaxy Digital earlier this year and its venture capital arm is already hard at work.

Business Insider has learned that Galaxy, which has businesses in asset-management, trading, and investing, has made a significant number of investments in the market for digital coins which have not yet been disclosed publicly.

People familiar with the firm's operation said that the principal investment team, which staffs six people, has invested in high-volume ICO projects and has a significant portfolio of early stage ventures.

The firm already announced it led a $15 million round in AlphaPoint, a New York firm that helps companies launch their own digital tokens, but other investments by Galaxy remain under wraps.

Leading the unit's efforts is Sam Englebardt, a venture capital veteran who joined Galaxy in 2017. Greg Wasserman, a former vice president at Goldman Sachs, joined the firm as co-head of the venture unit in February. Chris Zioli, formerly of Insight Ventures, also is on the team.

Galaxy has two pools of capital, including a $325 million EOS fund, which is specifically targeting companies that aim to operate off the EOS blockchain. Its second pool comes from the firm's balance sheet, which is in the "hundreds of millions," according to the people.

The firm's focus is to invest in infrastructure, meaning companies that are building products to help bridge the gap between Wall Street and crypto, like custody solutions and trading technology.

On Wall Street, custody banks such as State Street and BNY Mellon safeguard large amounts of wealth for other institutions while abiding by strict regulatory requirements. Some entities offer such solutions in crypto. BitGo, another crypto tech provider, is working on a qualified custodian product. Paxos, a New York-based firm, holds a trust-company charter in New York.

CMT Digital, another crypto venture capital firm, is looking at similar opportunities to Galaxy, said Colleen Sullivan, a partner at the firm.

"We look for things missing in the market," she added. "What can help usher a wave of institutional capital. That's better infrastructure and we definitely need custody solutions to mature."

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16. ‘Things could spiral out of control’ — Wall Street is more worried than ever that an all-out trade war will plunge the world into recessionСб., 23 июня[−]

Confused, worried trader

  • The global trade tensions being escalated by President Donald Trump could eventually plunge the world into recession, according to a growing chorus of Wall Street experts.
  • The prospect of an all-out global trade war has already prompted some investors to seek safety, providing a sample of the wide-reaching effects the conflict can have on markets.

If you think President Donald Trump's ongoing trade disputes have been disruptive, you haven't seen anything yet.

At least that's the message being delivered by strategists across Wall Street, who have watched in horror over the past week as the possibility of an all-out trade war has been ratcheted higher.

While an all-consuming worldwide conflict isn't the base case for these experts, it's become a plausible enough scenario that they're starting to quantify the potential negative impact. And their findings aren't pretty, particularly as it pertains to a possible economic recession.

Joseph Song, a senior US economist at Bank of America Merrill Lynch, has gone as far as to calculate the degree to which a full-fledged trade war would be a drag on US gross domestic product.

As shown in the chart below, the annualized growth rate of real GDP would decline by 0.3 to 0.4 percentage points relative to the baseline in the first year, then shave an additional 0.5 to 0.6 percentage points off in the second year.

Screen Shot 2018 06 22 at 10.53.24 AM

Song argues that this negative effect on GDP, coupled with a jolt to the currently sky-high level of investor confidence, could lead to a dreaded economic meltdown.

"Trade tensions are likely to get worse before they get better," Song wrote in a client note. "A trade war coupled with a confidence shock could push the US to the brink of recession."

'Things could spiral out of control'

Song's BAML colleague, James Barty, who serves as the firm's head of global cross-asset and European equity strategy, recently shared similar thoughts. He says while the tariffs that have been instated so far will have a minimal effect, the larger ones proposed this past week could take a bite out of the global growth forecast.

Citing data compiled by the International Monetary Fund (IMF), Barty says if the US, China, and Europe each raise import prices by 10%, then GDP would drop 2-3% in all three regions — and that doesn't even take into account peripheral effects like supply chain disruption.

Also troubling Barty is the public rhetoric being espoused by top Trump adviser Peter Navarro and Secretary of Commerce Wilbur Ross. In his mind, those two shouldn't be treating a possible trade war as something that can be "won," given the major side effects such an outcome could have.

"In a worst case scenario, our economists talk of the global economy being tipped back into recession," Barty wrote in a note to clients. "Clearly no one wants that, but when some — Navarro and Ross for example — talk about winning trade wars, then the risk is that things could spiral out of control."

Side effects are already hitting the market

As Wall Street experts increasingly conclude that the brewing trade war could be catastrophic for the economy, investors worldwide are already reacting with their portfolios.

They pulled a record amount of money out of both global equity funds and their emerging-market counterparts over the past week, according to data compiled by EPFR Global, which pegs these risk-off outflows to — you guessed it — rising trade tensions.

Screen Shot 2018 06 22 at 1.25.40 PM

Ironically enough, US and Chinese stocks saw inflows over the seven-day period, likely due to the strength of their underlying economies. So what we have is a situation where global markets outside of the two nations primarily locked in a tariff battle are suffering collateral damage.

But that's not to say the situation in the US is completely settled. As with many potentially precarious situations in the US market, the lightning rod is tech stocks.

Michael Harnett, the chief investment strategist at BAML, notes that US tech in particular has been bucking the risk-off trend playing out globally. The sector is on pace to absorb $37 billion on an annualized basis, according to the firm's data.

Screen Shot 2018 06 22 at 1.32.41 PM

This may seem like a positive sign for the health of the market, but it can also be construed as a ticking time bomb of sorts. Investors who are cautious of a market meltdown continuously cite the unstable and speculative nature of such activity, which sees investors piling into crowded positions as they chase past performance.

In the end, we're left with a double whammy-type situation where a potential all-out trade war has economists fearing the worst, while yield-hungry investors continue to stretch market conditions towards their breaking point. It doesn't take an investing pro, nor a seasoned economist, to realize that this is heading for a bad conclusion.

For the time being, traders would be best served to hedge existing positions as best they can. Because if a recession does finally hit, it's going to be jarring, no matter how prepared you are.

SEE ALSO: The inside story of how a $730 billion investment industry was born from the ashes of the tech bubble

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17. Elon Musk talks about robots all the time, but nobody else in the auto industry does — here's why (TSLA)Сб., 23 июня[−]

tesla factory

  • CB Insights used a linguistic algorithm to analyze 28 quarters of earnings calls from four automakers.
  • GM, Ford, Daimler, and Tesla were included in the study.
  • Tesla spends way more time talking about robots than the other three.

CB Insights, a data analytics firm, has done something interesting: it used algorithmic analysis to crunch 28 quarter of earnings-call transcripts from General Motors, Ford, Daimler, and Tesla.

The firm was able to make some intriguing observations from scrutinizing calls from 2011-2017, but one result stands out: Tesla spends way more time taking about robots than other automakers.

"Tesla is the only [company] talking about using robots in the assembly line, with mentions of 'robots' and 'robotics' reaching a new peak in 2017," CB Insights wrote in its Mobility Earnings Transcript Analysis report.

Automation has been a double-edged sword for Tesla. CEO Elon Musk has talked it up a major future differentiator, enabling Tesla to build vehicles better and faster. But in practice at the carmaker's factories in Fremont and Nevada, it's been a mixed bag. Some efforts at automation haven't worked, and human workers have been added to the process to fix problems.

Musk's "machine that builds the machine" is farther off than it might have seemed a year ago.

But why aren't other automaker's talking about robots?

The answer has two parts. First, Musk's embrace of automation is consistent with Tesla's story of disruption: in a brave new world of high-tech, Silicon Valley-inspired mobility, of course the dirty work will be done by machines.

Second, established automakers have their act together with robots and have been dealing with them for decades. They might not be trying to replace all human workers with robots — in fact, efforts to do so have been unsuccessful, and car companies have learned their lessons —but they're familiar with what automation can achieve. So they treat it as a given. If they had to talk about it, particularly on an earnings call, it might actually be a bad thing.

The bottom line is that GM and Ford use a lot of robots to build millions of vehicles globally and have for years. But because automation, as it is currently utilized, is completely baked into their business models, it's pointless to discuss it with Wall Street analysts. They're more concerned about financial results.

Tesla financial results have been extremely depressing: the company has never posted an annual profit in 15 years of existence and in 2017 lost more money than ever. The balance sheet is something of a disaster. The stock price, however, is riding high, largely on the strength of a story.

Robots have been, of late, a key part of the Tesla tale. So we shouldn't be surprised that Musk has been spending more time than anybody else telling investors about them.

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18. Here are all the US states that ship more than $1 billion worth of goods to China that would be slammed by tariffsСб., 23 июня[−]

Trump Xi

  • President Donald Trump escalated his trade dispute with China and is planning for $200 billion worth of Chinese goods to be subjected to an additional 10% tariff.
  • In turn, China said it would slap the US with tariffs on $50 billion worth of US imports starting in July.
  • China's tariffs would target energy and agricultural products, such as ornamental fish, whiskey, and coal — which would affect some states more than others.
  • There are eight US states that exported more than $1 billion worth of tariff-eligible goods to China in 2017.

President Donald Trump escalated his trade dispute with China earlier this week, ordering the US Trade Representative to compile a list of $200 billion worth of Chinese goods to be subjected to an additional 10% tariff.

Trump's decision came three days after he announced tariffs on $50 billion worth of Chinese goods that would be subject to a 25% tariff.

In turn, China said it would slap the US with tariffs on $50 billion worth of US imports starting in July. China's tariffs would target energy and agricultural products, such as ornamental fish, whiskey, and coal — which would affect some states more than others.

Business Insider used US Commerce Department data to determine the number of tariff-eligible goods from each state shipped to China in 2017.

Because of the US database's limitations, the totals include some foreign-sourced goods that may not be subject to China's tariffs. Those goods represent a small portion of the overall values.

Additionally, the database measures exports using a system called Origin of Movement. This measures where exports are sent from rather than where they are produced. While research shows that Origin of Movement can be a solid proxy for production, the Census Bureau data may provide an undercount for some upstream producers.

For instance, some farmers in the Midwest ship their soybeans to Louisiana for transport, which increases the count for Louisiana. Given the fact that Louisiana still relies on the shipping and sales for its economy, the data is still helpful to evaluate the pain from the tariffs — but it may undercount the lost value to some upstream producers.

There are eight US states that exported more than $1 billion worth of tariff-eligible goods to China in 2017:

1. Texas: Tariff-eligible export amount: $8,022,380,040

In Texas, the biggest hit will come from crude oil and propane. The state sent $3.7 billion worth of crude oil to China last year, and $1.7 billion worth of propane.

2. Louisiana: Tariff-eligible export amount: $6,627,390,388

Some farmers in the Midwest ship their soybeans to Louisiana for transport, which increases the count for Louisiana.

Given the fact that Louisiana still relies on the shipping and sales for its economy, the data is still helpful to evaluate the pain from the tariffs — but it may undercount the lost value to some upstream producers.

3. Washington: Tariff-eligible export amount: $5,231,988,100

See the rest of the story at Business Insider

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19. Who should be Intel's next CEO? These are the top candidates people are buzzing about (INTC)Сб., 23 июня[−]

Intel Navin Shenoy

  • Intel's former CEO Brian Krzanich was out of the job so suddenly, the company had to appoint an interim CEO while it embarks on a search.
  • That means it's time to play: who will be the next CEO?
  • Intel has always hired from within, but says it will be looking for candidates inside and outside the office.
  • Here's a list of the candidates people are buzzing about based on our conversations with people, online water cooler chat and a few of our own thoughts.

With Brian Krzanich's sudden and surprise departure from Intel's corner office, it's time to play the who-will-take-his place game.

Intel has a long tradition of grooming its CEOs from within its internal ranks.

That makes a lot of sense given how huge the company is across so many different electronics markets, from PC processors to memory to networking and so on.

Most importantly, the CEO of Intel needs to balance two very distinct jobs:

1. Keeping a global network of multi-billion dollar chip manufacturing facilities running smoothly and without any hiccups.

2. Having the vision to focus on the right products and to steer the company into new markets (without missing the next big thing, as Intel famously did in mobile).

: Intel CEO Brian Krzanich speaks during an Intel press event for CES 2017Finding someone who can do both of those jobs is no easy feat, which is why the company has always ended up going with someone internal.

But times are changing. The company is still recovering from missing the boat on the mobile platform shift. And some chip industry insiders are buzzing that now may finally be the time for Intel to break with tradition.

Intel itself said, quite deliberately, that it will be looking at CEO candidates externally, as well as internally — and for good reason. Most of the top internal candidates are relatively new hires. So if you're going to go with someone who hasn't been there very long, it opens to door to going with fresh blood altogether.

The most likely candidates internally are:

Bob Swan, who is currently interim CEO. He joined Intel in 2016 as CFO, and he may looking at this as an extended job interview. He may succeed and nab the top role permanently for himself.

The main downside to Swan is that he's a straight up financial guy, not an engineer. He was the CFO of eBay for nine years, and also worked at investing firm General Atlantic. To succeed, he'd have to build a brain-trust of execs that could run the technical side of the business, and fix Intel's 10nm (and beyond) chip fabrication issues.

Intel Murthy RenduchintalaNavin Shenoy joined Intel in 1995 and currently runs Intel's all important data center group. He's the classic choice as he grew up inside Intel and cut his teeth as the technical assistant to former Intel CEO Paul Otellini. He's known internally for having the product vision that Intel needs right now.

Venkata Renduchintala, known at Intel as Murthy. Renduchintala was hired away from Qualcomm in 2016 and currently runs Intel's hefty client device products and its hot up-and-coming Internet of Things (IoT) products.

He's got the technical chops, though his management style has raised eyebrows in the past. In a 2016 Business Insider profile one person described Renduchintala as being "loud" and "not afraid to say" his opinion, while another called his leadership style "command and control" where he often "dressed down" underperforming executives at Qualcomm.

Intel Jim KellerRaja Koduri was hired away from AMD in 2017. He runs a new group that was formed when he was hired —Intel's Core and Visual Computing Group, which deals with graphics and other visual technologies.

Jim Keller is the newest hire, joining in April from his short-lived stint running Tesla's self-driving autopilot group (a job at Tesla that has seen a lot of turnover). Prior to that, Keller spent most of his career in semiconductors for AMD and others. He's a long-shot but if Intel wanted to bring in fresh blood for its CEO while still maintaining its tradition of hiring from within, Keller could be the guy. He currently leads chip engineering.

Top outsiders

If Intel is serious about looking outside the company, one place it might want to prowl is the Taiwan Semiconductor Manufacturing Company (TSMC), the giant chip manufacturer that makes processors for everyone from Apple to Qualcomm.

Rick Cassidy is CEO of TMSC's North America unit. TSMC's semiconductor manufacturing process is kicking Intel's butt. As Intel has struggled to get its 10nm chips into production while dreaming of its 7nm offerings, TSMC not only already has 10nm chips available, earlier this year it started mass producing 7nm, and is working on 5nm, the chip that is supposed to be the "end of Moore's Law." Hiring someone from TSMC might be the boost Intel needs.

AMD Lisa SuSanjay Jha is the recently departed CEO of Intel's fab rival Global Foundries, who left that role March after four years as CEO. He's also the former COO of Qualcomm. It's not clear why Jha left, whether he was falling short of expectations or if he quit on his own. Global Foundries has a reputation of being a hard place for CEOs, and has gone through four CEOs now in less than a decade, EE Times' Rick Merritt reports.

The dream CEO for Intel employees is AMD's Lisa Su. It seems far fetched that she would jump ship though. Su has been crushing it at AMD and she'd be leaving for AMD's all-time arch rival.

People are also talking about Renee James, the one time heir apparent to Krzanich. But she is unlikely to go back to Intel. James spent 28 years at Intel and left in 2015 and earlier this year came out of stealth as CEO of her own chip company, Ampere. She's deliriously happy doing her own startup, she previously told Business Insider.

SEE ALSO: Former Intel board member who left a month ago was totally surprised by the CEO's resignation


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20. Over 100 Amazon employees, including senior software engineers, signed a letter asking Jeff Bezos to stop selling facial-recognition software to policeПт., 22 июня[−]

jeff bezos amazon ceo

  • Amazon employees signed and sent a letter to CEO Jeff Bezos asking the company to stop selling facial-recognition software to law-enforcement agencies and to cease its business dealings with Palantir.
  • The letter was signed by over 100 Amazon workers, including senior-level engineers, sources told Business Insider.
  • You can read the full letter below.

On Thursday a group of Amazon employees sent a signed letter to CEO Jeff Bezos calling on the company to stop selling a sophisticated facial-recognition software to law-enforcement agencies.

Business Insider has learned that more than 100 Amazon workers signed the letter, including some senior engineers.

Those who signed the letter want the company to cease "providing infrastructure to Palantir (the company that builds predictive policing tools) and any other Amazon partners who enable (Immigration and Customs Enforcement)," according to documents reviewed by Business Insider. They also ask that Amazon "implement strong transparency and accountability measures" that identify which law enforcement agencies are already using the company's technology.

Last May, the American Civil Liberties Union reported that Amazon had “officially entered the surveillance business.” The ACLU said that it had seen Amazon’s marketing materials for Rekognition and that it had focused on selling the software to governments and police. The ACLU also wrote that Rekognition, powered by artificial intelligence, could in real time "identify, track and analyze" the faces of up to 100 people from a single image.

In a blog post three weeks ago, Dr. Matt Wood, general manager of artificial intelligence at Amazon Web Services, defended Rekognition, saying the technology was already benefitting society by "preventing human trafficking" and "inhibiting child exploitation."

"Each organization choosing to employ technology must act responsibly," Wood wrote. "AWS takes its responsibilities seriously. But we believe it is the wrong approach to impose a ban on promising new technologies because they might be used by bad actors."

The letter to Bezos is the latest in a recent string of employee revolts at some of the tech sector's biggest companies. Many tech workers don't want to help create software or other tech that might be used to wage war or conduct surveillance on the public. The Hill first reported about the existence of the letter.

At Google, employees not only circulated a petition that demanded Google stop supplying artificial-intelligence tools that assisted the US Department of Defense to analyze drone-video footage, but someone within the company also leaked some embarrassing emails that showed the extent of management's ambitions on working with the military.

Eventually, Google relented, and earlier this month the company promised not to make AI weapons or use the technology for anything that could cause harm.

Microsoft employees followed suit by calling on management to end its cloud-computing contract with the Immigration and Customs Enforcement, or ICE.

Read the full letter to Amazon CEO Jeff Bezos below:

Dear Jeff,

We are troubled by the recent report from the ACLU exposing our company’s practice of selling AWS Rekognition, a powerful facial recognition technology, to police departments and government agencies. We don’t have to wait to find out how these technologies will be used. We already know that in the midst of historic militarization of police, renewed targeting of Black activists, and the growth of a federal deportation force currently engaged in human rights abuses — this will be another powerful tool for the surveillance state, and ultimately serve to harm the most marginalized. We are not alone in this view: over 40 civil rights organizations signed an open letter in opposition to the governmental use of facial recognition, while over 150,000 individuals signed another petition delivered by the ACLU.

We also know that Palantir runs on AWS. And we know that ICE relies on Palantir to power its detention and deportation programs. Along with much of the world we watched in horror recently as U.S. authorities tore children away from their parents. Since April 19, 2018 the Department of Homeland Security has sent nearly 2,000 children to mass detention centers. This treatment goes against U.N. Refugee Agency guidelines that say children have the right to remain united with their parents, and that asylum-seekers have a legal right to claim asylum. In the face of this immoral U.S. policy, and the U.S.’s increasingly inhumane treatment of refugees and immigrants beyond this specific policy, we are deeply concerned that Amazon is implicated, providing infrastructure and services that enable ICE and DHS.

Technology like ours is playing an increasingly critical role across many sectors of society. What is clear to us is that our development and sales practices have yet to acknowledge the obligation that comes with this. Focusing solely on shareholder value is a race to the bottom, and one that we will not participate in.

We refuse to build the platform that powers ICE, and we refuse to contribute to tools that violate human rights.

As ethically concerned Amazonians, we demand a choice in what we build, and a say in how it is used. We learn from history, and we understand how IBM’s systems were employed in the 1940s to help Hitler. IBM did not take responsibility then, and by the time their role was understood, it was too late. We will not let that happen again. The time to act is now.

We call on you to:

1 . Stop selling facial recognition services to law enforcement
2. Stop providing infrastructure to Palantir and any other Amazon partners who enable ICE.
3. Implement strong transparency and accountability measures, that include enumerating which law enforcement agencies and companies supporting law enforcement agencies are using Amazon services, and how.

Our company should not be in the surveillance business; we should not be in the policing business; we should not be in the business of supporting those who monitor and oppress marginalized populations.



Join the conversation about this story »

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