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1. We asked 2 of Citigroup's top executives what they look for when hiring senior investment bankers (C)20:35[−]

citi headquarters

  • Citigroup's investment bank has been showing signs of progress and competing among Wall Street's best.
  • We asked two of the bank's top executives what they look for when hiring senior investment bankers.
  • Performance matters, but it's not the only thing. "We can't have people on solo missions," says Raymond McGuire, Citi's global head of corporate and investment banking.


Citigroup's investment bank has been making strides in recent years to compete for top honors in the league tables.

The bank, already a strong performer in arranging bonds and loans, has made marked progress in 2017 in both its mergers-and-acquisitions advisory and equity-capital markets businesses.

One key to Citi's success is talent — retaining their top performers, but also bringing in star bankers that will fit into Citi's team culture.

"The foundation to this, the bedrock to this is talent. You have to make certain that you have the talent that is the best trained, that has the best experience, that can exercise the most refined judgment," said Raymond McGuire, global head of corporate and investment banking, who's personally involved in every major strategic hire for his department.

Citi has hired more than 20 at the managing director level around the world for its corporate and investment-banking division this year, according to a memo McGuire sent his staff in early November.

And the bank this week promoted 33 staff in its corporate and investment bank to managing director, along with seven staff in capital markets origination.

Business Insider recently spoke with McGuire and Tyler Dickson, the global head of capital markets origination, about what they look for in hiring senior-level bankers:

Responses have been lightly edited for length and clarity.

SEE ALSO: We asked a top hedge-fund recruiter what it takes to get a senior-level job these days

McGuire's overall strategy revolves around both attracting and maintaining strong performers who are also "culture carriers" — no solo missions allowed. That means getting involved in every major hire.

"You have to attract and retain the best talent. So for the existing talent, you’ve got to make certain that they continue to perform, that they continue to be engaged and inspired to be the best. And for the talent that you onboard, you have to be really careful about the talent that you onboard. They have to not only be the best practitioners, but they also have to be culture carriers. And we have found that, while we've had some challenges, for the most part we've been very effective at integrating new people into the culture. In large part, we do that from the outset. I personally get involved in every one of these major strategic hires.

"It's very clear that you not only have to maintain the best of the existing talent. You cannot ignore that. You have to maintain it, you have to focus on that. And you also have to make sure that the talent that you onboard has got a value system and has got an alignment that is very clear. There should be no ambiguity in terms of what our objectives are. None."



What question does he ask potential candidates to find out whether they're the right fit?

"There's not one question that you ask, there are a series of questions. What kind of character do they have. What kind of client impact. How is that client impact reflected in their performance, historically. And character gets to whether they are a team player or whether or not they're on solo missions. We can't have people on solo missions, we need to have people who are prepared to engage as partners.

"We also recognize that you have to have a combination of management and leadership. You have to be able to give people the details on a daily basis on the metrics that we expect for them to manage to. And then you have to be able to inspire them."



For equity capital markets, Dickson looks for leaders with years of experience and the respect of investors and issuers. But they also have to be comfortable sharing the spotlight.

"In the business of financial services, talent is the most valuable resource, if you can get the best talent. From Citi's perspective we want the best-in-class, best-performing people in the marketplace. So experience matters. In my case, if we're looking at the equity capital markets arena, are they leaders with issuer clients? Do they have the respect of investing clients? Do they have years of experience in their sector or subproduct?

"But I'd say what's also important is culturally for Citi, we're a firm that succeeds as a team, and so they have to be people who can fit in with Citi's overarching culture. But also within capital markets, we're very much a team-wins orientation, and so you need a lot of leadership and energy and inspiration to lead the team, but we want people who think when we're winning it's because the team is winning. And I think that the folks that we've developed, and I've said we've been blessed with this consistency, all feel like partners in the business."



See the rest of the story at Business Insider

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2. 'Red flags' for the oil market are popping up all over the world20:05[−]

oil worker

  • Crude oil prices entered a correction, plunging more than 10% from their January highs.
  • While its easy to point fingers at the broader market turmoil, RBC Capital Markets highlights a number of warning signs that could weaken the commodity even more.
  • They include the crowd of investors betting on higher prices, gushing US production, and rising Chinese exports.


Crude oil prices slumped into correction — a 10% drop from their January highs — amid the turmoil that hit stocks over the past two weeks.

But according to commodity strategists at RBC Capital Markets, investors would be wise not to ignore several risks that may drive prices even lower. Short of sounding "alarm bells" in their note on Tuesday, the strategists led by Michael Tran said pockets of the market are getting oversupplied again. That's problematic because production cuts led by members of the Organisation of Petroleum Exporting Countries and allies including Russia helped drive a nearly 45% rally since last September, and pushed oil above $60 per barrel.

"Oil prices needed a breather and investors should not discount the caution signs that have been emerging," Tran said in the note.

He added: "In our view, the market has been overly focused on the race toward rebalance without realizing that transient pockets of oversupply have been emerging in the physical market."

West Texas Intermediate crude oil, the US benchmark, traded down 1% at $58.75 per barrel at 9:18 a.m. ET on Tuesday.

In the North Sea, Tran identified the weakening premium that crudes produced there, such as Brent, held over their benchmark contracts. "The Forties differential to front month Brent futures moved from a premium of 75¢/bbl last month to lows last week of -50¢/bbl," Tran noted. "Such drastic weakness is indicative of an oversupply or a soggy regional spot market." He added that the sudden shutdown of the Forties, Britain's largest oil pipeline, failed to move oil meaningfully higher.

Across the Atlantic and in the US, Tran noted that shale producers continue to gush oil, funded by a market that got "too bullish" on price.

"The bearish output rhetoric seemingly took a temporary back seat while the market rallied over recent months, but the spotlight has returned following the surge in production to levels well eclipsing 10 mb/d for the first time in almost 50 years," he noted.

Screen Shot 2018 02 13 at 9.14.17 AM

Additionally, the next few weeks will be key to watch as refineries fire up after their maintenance season. That's when the market's ability to absorb US barrels will be tested, he said.

In Asia, China's import growth, which nearly doubled over the last two years, has been a key source of demand. But its exports are also rising, Tran said, showing that domestic refineries are overproducing.

And although they've been dialed back, Saudi Arabia's exports are nearing record levels.

One final, location-agnostic red flag is overextended investor positioning. Passive investors have piled into long West Texas Intermediate crude positions since the start of the year.

"Stretched investor length means that a further jolt to the market, irrespective of origin, whether it be from broad market jitters or softer physical fundamentals, can make for violent swings to the downside," Tran said.

Screen Shot 2018 02 13 at 9.13.43 AM

SEE ALSO: CITI: There's a ‘clear winner’ for investors who want to cash in on the market's biggest fear

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3. Here's a definitive guide to the state of each business on Wall Street, which is coming off a ghastly year19:18[−]

storm over new york wall street

  • Wall Street investment banks had a rough 2017 as revenues slid to $150.4 billion — the lowest level since 2008.
  • Struggles in trading plagued the banks, with fixed income, currency, and commodities (FICC) businesses especially hard hit.
  • Business from investment banking underwriting and advisory services was the lone bright spot, but the substantial gains weren't enough to compensate for the losses in trading.


Wall Street investment banks had a ghastly year in 2017, with revenues sinking to $150.4 billion — the lowest level since 2008.

That's according to a new report from industry consultant and analytics company Coalition.

The dismal year was led by banks' underperforming trading departments, which were plagued by low volatility. Revenues from fixed income, currency, and commodities (FICC) fell 11% to $68 billion and equities fell 4% to $41.8 billion, according to Coalition.

Business from investment banking underwriting and advisory services — on mergers and acquisitions and other transactions — increased substantially to $40.6 billion, a 10% increase from the previous year but not nearly enough to compensate for the losses in other lines of business.

Even with volatility jolting back to life thus far in 2018, investment banks face a tough road ahead to fattening revenues and reviving their trading operations.

Here's a breakdown of the state of every line of business on Wall Street.

Investment banking revenues fell 4% to $150.4 billion, a $5.7 billion decline from 2016. A terrible year in FICC was the main culprit, with revenue falling $7.9 billion, or 11%.



The year started off with strong momentum, as banks generated $82 billion in the first half — up 4% from the first half of 2016. But the second half was abysmal. Revenues in the back half of 2017 fell 11%, or $8.6 billion, below last year's mark.



FICC businesses saw deep declines as they reckoned with record-low volatility. Revenues now sit $35 billion below 2012 levels — a 33% decline. Commodities fell 42% from 2016 to $2.5 billion, its lowest level since 2006. Securitization was the exception, increasing 15% thanks to the demand for complex financing solutions.



See the rest of the story at Business Insider

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4. Chipotle is testing a trendy new menu item — and it proves the struggling chain has entered a new era (CMG)19:16[−]

Chipotle Test Kitchen 11

  • Chipotle added quinoa to the menu at its New York City test kitchen.
  • The trendy grain is just one of the many new menu items that Chipotle has tested in the last year, including queso, which was later added to menus across the US.
  • The chain is entering a new era, with Taco Bell's CEO taking over as top executive — a position long held by Chipotle's founder.

Chipotle is adding a trendy new item to the menu at its test kitchen.

On Monday, the struggling burrito chain began serving quinoa at its New York City test kitchen.

"The quinoa is made with red and gold quinoa tossed with a little citrus juice, cumin and freshly chopped cilantro," Chipotle representative Chris Arnold said in an email to Business Insider. "We are recommending that added to a salad, or in place of rice in another entrée."

Quinoa Chipotle

Chipotle has long avoided adding more items to the menu, as its simple style of assembly-line food preparation has been crucial to its success.

However, Chipotle's resistance to change has begun to crumble.

In July 2017, Chipotle debuted a New York City test kitchen that is open to the public. Chipotle kicked off the location's launch by serving queso at the restaurant.

Chipotle rolled out the cheesy dip across the US in September. While critics slammed Chipotle's queso, the company reported in February that the new menu item had led to a 2% increase in customers' average check.

Chipotle hinted that more new menu items might be in the works earlier in February. Founder and CEO Steve Ells said in a call with investors that the company is considering "salads with different kinds of grains," as well as "traditional things" like nachos and quesadillas.

The chain's incoming CEO will also serve as a crucial player in Chipotle's new plan to add more new menu items.

Earlier in February, Chipotle announced that Taco Bell CEO Brian Niccol will be taking over as the chain's top executive in early March. While Chipotle has long attempted to keep its menu extremely simplistic, Taco Bell has found success by constantly rolling out new limited-time offerings, such as nacho fries and the Naked Chicken Chalupa.

Not every item that Chipotle serves in its test kitchen rolls out across the country. For example, Chipotle has been serving nachos in the test kitchen for months — but hasn't yet indicated any plans to roll out the dish to more locations.

However, the new menu item proves that Chipotle is not finished experimenting with new dishes. And, with a trendy health-conscious choice like quinoa, the chain demonstrates that adding new dishes doesn't mean it needs to ditch its obsession with quality, all-natural ingredients as it adjusts its menu strategy.

SEE ALSO: Chipotle just hired Taco Bell's CEO to run the company — here are the changes to expect

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NOW WATCH: What it's really like inside Amazon's new no-line grocery store.

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5. Investors are piling back into an infamous trade that just blew up19:11[−]

crowded subway train

  • The short-volatility trade imploded last week, as a sharp spike in the Cboe Volatility Index, or VIX, wiped out positions.
  • That hasn't stopped investors from continuing to pile into short-VIX products, even on the heels of a stock market correction that the strategy helped fuel.

Investors have wasted no time in piling back into a now-infamous trade that recently blew up.

They've poured more than $575 million into the ProShares Short VIX Short-Term Futures ETF (SVXY) since the start of the stock market's correction back on February 2, according to Bloomberg data. At a time when volatility has come raging back, the inflow activity shows a continued willingness to bet against price swings in equities.

Designed to return the inverse of the Cboe Volatility Index, or VIX, the fund was blamed for exacerbating the stock market's drop of more than 10%. The fund and the VelocityShares Daily Inverse VIX Short-Term ETN (XIV) lost roughly 95% of their combined value last week when the underlying VIX more than doubled in a single day.

That triggered a swift unwinding in the short-volatility trade as investors were forced to buy VIX to close their positions. The implosion was ultimately blamed for the late-day selling that contributed to a 4.1% one-day drop in the S&P 500.

2 16 18 short vix COTD

The argument can be made that investors have failed to learn their lesson following the massive declines in SVXY and XIV. After all, according to the flows outlined above, SVXY has kept chugging along just fine, even as the suspension of XIV looms. Apparently there's still a large contingency of VIX bears who are now looking to rebuild short positions at more attractive prices.

The continued short of the VIX is sure to draw the consternation of the experts across Wall Street who repeatedly criticized the strategy leading up to its meltdown.

Those experts include Marko Kolanovic, JPMorgan's global head of quantitative and derivatives strategy, who has in the past said the shorting of volatility reminded him of the conditions leading up to the 1987 stock market crash. Alain Bokobza, Societe Generale's head of global asset allocation, is also likely to be perturbed, considering he once likened shorting the VIX to " dancing on the rim of a volcano."

Morgan Stanley's chief US equity strategist, Mike Wilson, however, thinks the situation is far less dire than before, and argues the big drop in short-volatility products actually helped flush out risky positions.

"We cleansed a risk that was out there for the marketplace," he told Business Insider in a recent interview. "The market handled this risk very efficiently. If we ever do have a real fundamental sell-off or recession, people are worried that there's going to be unlimited selling from these strategies, but I think that's wrong."

SEE ALSO: 2 red-hot investment products just blew up, erasing almost $3 billion in minutes

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6. Why Bristol-Myers Squibb made a $1.85 billion bet on a cancer drug (BMS)18:20[−]

Cancer immunotherapy

  • Bristol-Myers Squibb is paying Nektar Therapeutics $1.85 billion for a promising cancer drug.
  • As part of the deal, $1 billion of that cash is upfront in exchange for 35% of the global profits for the drug, known as NKTR-214.
  • NKTR-214 is a kind of cancer immunotherapy treatment known as an interleukin-2 agonist, and the hope is to use it in combination with other treatments to boost the body's immune reaction to cancer.


Bristol-Myers Squibb is making a billion-dollar bet on an experimental cancer drug that goes after the body's immune system.

The drug, NKTR-214, is being developed by Nektar Therapeutics. BMS and Nektar have partnered over the drug in the past, when looking to see how the drug works in combination with BMS's drug Opdivo.

As part of Wednesday's deal, $1 billion of that cash is upfront in exchange for 35% of the global profits for the drug. The drug is currently in clinical trials testing out how the drug works in combination with Opdivo in people with certain types of cancer including breast and kidney.

It's a high price tag, making it one of the largest up-front fees a pharmaceutical company has paid for a single drug.

The hope is that the drug can enhance the work that the checkpoints are doing, and in turn getting it to work in more people, expanding the field of immuno-oncology.

"We now have a third validated I-O mechanism that has demonstrated a clinical benefit in patients, and holds significant potential to expand the benefits that these immuno-oncology agents can bring to patients with cancer," BMS CEO Giovanni Caforio said in a release.

Boosting cancer immunotherapy

Some of the biggest cancer treatment successes in the past few years have come from a relatively new field called cancer immunotherapy, in which the body's immune system is manipulated to treat the disease.

Opdivo and Yervoy — drugs owned by BMS that the company will study in combination with Nektar's drug — are known as checkpoint inhibitors, drugs that tell the immune system to take the foot off the brakes and go after cancer cells it might not have otherwise attacked.

NKTR-214, on the other hand, is aimed at activating proteins that signal the body's immune system, specifically ones known as IL-2. The hope is by going after IL-2, the body might produce more T cells that'll go after cancer cells, ultimately helping patients get cancer-free. In the car analogy, NKTR-214 is essentially aiming to put more gas in the engine for when the brake gets released.

Finding new ways to enhance the body's reactions to cancer cells is key to getting cancer immunotherapy to work in more people.

So far, treatments like the checkpoint inhibitors have had a lot of success treating some patients, but not all.

SEE ALSO: The search for new Alzheimer's treatments just faced another setback — here's where researchers are looking now

DON'T MISS: Bristol-Myers Squibb just claimed 'a breakthrough in cancer research' — but there's a catch

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7. Millennials are making a big mistake when it comes to investing, Morgan Stanley's US equity chief says18:13[−]

young people women beautiful millennials

  • Morgan Stanley's chief US equity strategist, Mike Wilson, says millennials have steered clear of the stock market because of bad timing.
  • He thinks they should give stocks another shot, specifically as it pertains to saving for retirement.


The stock market has an image problem — at least with millennials.

So says Mike Wilson, Morgan Stanley's chief US equity strategist. He argues that millennials grew up in a period that inconveniently coincided with a patch of stock weakness and left a sour taste in the mouths of millions. That, in turn, kept those people from testing out the market.

He's referring to the two most recent stock market crashes: (1) the dot-com bubble that threw markets for a loop in the early 2000s, and (2) the financial crisis of 2007-2008, which was most infamously marked by the failure of multiple large US banks. Both periods saw the benchmark S&P 500 lose more than 45% of its value.

Wilson thinks the resulting aversion to equities has at least partially led to the wild popularity of alternative investment products like bitcoin. He also thinks millennials should give stocks another shot.

In an interview with Business Insider, Wilson elaborated on those thoughts and also expressed his views on the market cycle, his 2018 forecast, the much-maligned short-volatility trade, and the outlook for stock pickers. Read the full interview here.

Here's what Wilson had to say (emphasis ours):

"Unfortunately, the millennial generation grew up in a secular bear market. They came of age at a time when investing in the stock market was a bad deal.

"A young investor needs to understand history and past market cycles. Investing in equities, generally speaking, is going to be a very good deal over the next six, seven years.

"A lot of younger people are interested in things like cryptocurrencies, or alternative investments, because they've kind of turned their backs on stocks, but that's a mistake. Stocks need to be a big part of someone's retirement or savings. It's still one of the best ways to compound savings over a long period of time."

SEE ALSO: Morgan Stanley's US equity chief explains why the recent meltdown signaled the 'final stage' of the bull market

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NOW WATCH: Microsoft President Brad Smith says the US shouldn't get 'too isolationist'

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8. A top private equity recruiter explains why there's a 'perfect storm' for hiring right now18:05[−]

A line of severe storms cross the Mississippi River

  • Fundraising and "dry powder" in the private-equity industry is booming.
  • This "perfect storm" has stoked demand for talent and increased compensation for junior-level employees, according to top recruitment firm Heidrick & Struggles.
  • Senior talent is as coveted as ever, but money is less of a concern and they're harder to lure away.


Compensation is surging at private-equity firms, especially for junior-level employees, thanks to a "perfect storm" in the industry that's fueling competition for talent, according to top Wall Street headhunting firm Heidrick & Struggles.

The firm recently released its "2017 North American Private Equity Investment Professional Compensation Survey," compiling compensation data from more than 600 private-equity professionals.

Fifty-four percent of respondents reported their base salary increasing from 2016 to 2017, consistent with last year's survey figures. Associates and senior associates saw the largest increase, with salaries growing 14% to $125,000, followed by vice presidents with a 13% increase to $198,000, according to the survey.

"That's a reflection of the fact that fundraising has been so strong. There's so much capital pouring into private equity right now, to a certain extent away from real estate and away from hedge funds," Jonathan Goldstein, a partner at Heidrick & Struggles who heads their private equity practice in the Americas, told Business Insider. "The allocation to alternatives is growing, because you have so many pension funds with underfunded commitments, so everybody is looking for yield."

Fundraising boomed in the first half of the year, with investors committing $113 billion to 117 US funds, according to Heidrick's report. Dry powder stands at a staggering $545 billion.

Deal-making and exits were also robust, with $300 billion across 1,770 completed deals, according to the report.

The influx of money to private equity and record-sized funds has created more opportunities and thus more demand for young talent.

"This creates a perfect storm for increased hiring," Goldstein added.

Salaries for principals increased 6% to $250,000, while managing directors and managing partners saw no increase. Of course, most of the compensation at these levels comes not from salary but rather from bonus and carried interest — a slice of the profits a fund generates.

That data isn't yet available for 2017.

Senior private-equity talent is as coveted as ever, but the opportunities at the top are fewer and the industry's strength has made it more difficult to lure away the best talent, according to Goldstein.

Robust fundraising and performance has made already well-compensated managers "stickier," and Heidrick, which focuses on hiring at the VP level or higher, reports having to reach out to two to three times as many prospective candidates as in recent years to fill positions.

Money isn't as much a draw at this point as a bigger platform or more influence.

"To move requires an extraordinary opportunity," Goldstein said. "Candidates don't look to move from one firm or another for a slight uptick in comp."

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9. TOM LEE: Bitcoin will surge to new record highs by July17:12[−]

Tom Lee

  • Tom Lee, the noted bitcoin uber-bull, says that the once-hot cryptocurrency will break out to new record highs in July.
  • He argues that the majority of bitcoin selloffs are "V-shaped," and says that recoveries take 1.7 times the length of the downturn.

Bitcoin's foremost bull is at it again.

Tom Lee, the managing partner and head of research at Fundstrat Global Advisors, says that the once-hot cryptocurrency will make a comeback for the ages and re-test record highs by July.

It would be an incredible rebound for bitcoin, which plunged as much as 70% after reaching an all-time high of $19,511 in mid-December. And while this may seem nuts, Lee has data to support his assertion.

He analyzed the 22 prior occasions that bitcoin dropped more than 20% and found that, during bull periods, recoveries take 1.7 times the duration of a decline. If that trend holds, the cryptocurrency would achieve a full recovery in 85 days, which means July.

One caveat is that this is only true when bitcoin is in a bull phase. And while it may seem surprising that we're still in one, Lee argues that we are, citing a longer-term upward trend.

"73% of bitcoin bottoms are V-shaped," Lee wrote in a client note. "This recent 70% decline is severe," "We can see a case for bitcoin’s resilience here given the sharpness of the recent decline."

Screen Shot 2018 02 15 at 4.16.40 PM

SEE ALSO: BlackRock is using robots to better predict the future of the economy

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NOW WATCH: Microsoft President Brad Smith says the US shouldn't get 'too isolationist'

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10. Hot tech stocks have 'lost their shine' among millennials after mixed earnings17:00[−]

millennials

  • Some of the hottest tech stocks have "lost their shine" among millennials, according to data from the stock trading app Stockpile.
  • AMD and Square slipped on the app's ranking of most-traded stocks, falling to 13th from 10th place, and 21st from 15th, respectively.
  • Tech stocks have had a mixed earnings season.


The lukewarm earnings season seems to have tempered millennials' enthusiasm for some of the hottest tech stocks.

After the market selloff, shares of some of the biggest tech names have fallen out of favor with young investors, according to data from stock trading app Stockpile, which is popular with millennials. This comes on the heels of lackluster earnings data and a jobs report that showed the fastest rise in hourly wages since 2008 and hinted at inflationary pressures ahead.

AMD and Square seem to "have lost their shine" with investors, according to a Stockpile spokesperson. AMD is now the 13th most traded stock on the app — which allows users to trade in fractional shares — down from 10th place. Square moved lower to the 21st place from 15th.

AMD reported an earnings beat across the board, though investors showed some signs of disappointment over its handling of the Spectre CPU flaw. The subsequent patches to fix the issue affected its chips' performance by as much as 30%. Meanwhile, Square, which is set to report earnings on Feb. 27, announced it would allow bitcoin trading on its platform though critics question how CEO Jack Dorsey could manage to run both Square and Twitter.

The high-flying FAANG stocks still enjoyed positions among the top 10 most-traded stocks on Stockpile, though Apple's and Facebook's positions slipped.

Facebook beat Wall Street estimates, though it said that users were spending fewer hours a day on its platform. Amazon enjoyed a blockbuster quarter while Apple disappointed investors because of its slower iPhone sales. Netflix posted a good earnings quarter, reporting a healthy pace of subscriber growth despite already being in most US homes. But Alphabet's Google missed estimates over higher traffic acquisition costs and higher expenses to reach smartphone users.

Notably, Stockpile data revealed that shares of Snap, Tesla, and Ford were rising in popularity in the trading app in the past seven days. Snap reported an explosive first quarter, Tesla showed stronger-than-expected earnings results, and Ford missed on earnings, though investors saw positive signals in its joint venture with Chinese firm Zotye and autonomous driving partnerships with Lyft and Domino's Pizza.

Here's a list of millennials' top 15 most-traded stocks on Stockpile:

  1. Bitcoin Investment Trust (GBTC)
  2. Amazon (AMZN)
  3. Tesla (TSLA)
  4. Apple (AAPL)
  5. Snap (SNAP)
  6. Alphabet Class A (GOOGL)
  7. Disney (DIS)
  8. Netflix (NFLX)
  9. iShares Core Growth Allocation ETF (AOR)
  10. Facebook (FB)
  11. Nvidia (NVDA)
  12. Ford (F)
  13. AMD (AMD)
  14. Berkshire Hathaway (BRK.A)
  15. Alibaba (BABA)

Read more about why Apple may be moving past the iPhone and how that might actually be a good thing.

SEE ALSO: Apple's 'defining moment' is here — and it may mean moving past the iPhone

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NOW WATCH: Microsoft President Brad Smith says the US shouldn't get 'too isolationist'

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11. Amazon got bigger than Microsoft by beating it at its own game16:15[−]

Google engineer, servers



When Amazon came online in 1995 selling books, Microsoft already had two decades of computer-selling experience under its belt.

For the next 20 years, despite Amazon's skyrocketing growth, Microsoft maintained it's lead. But Amazon's web services division, called AWS, was quietly sneaking up. And last week it finally paid off. On Wednesday, Amazon officially surpassed Microsoft's market value, making it the third-largest publicly-traded company in the United States.

In 2017, AWS brought in $18 billion of revenue for Amazon — 20% less than Microsoft's competing cloud service's $27.4 billion, but has been growing at a much more rapid pace. From 2016 to 2017, AWS revenues grew 42% from $12 billion to $17 billion, while Microsoft's cloud revenue contributions grew just 9%, according to each company's respective balance sheets.

And when it comes to clients who are actively using cloud services, Amazon's lead becomes even more clear:

Cloud center on ramps credit suise

As the chart from Credit Suisse shows, Amazon's on-ramps — or number of clients tapping into AWS data centers to do business — far outpaces any competitor, and are more than double Microsoft Azure's.

And while the two companies jockey for position, both in cloud-computing and in the race for market cap, they may be able to grow their businesses together. The size of the cloud will grow significantly, to $342 billion by 2021 according IHS Markit. That's a compound annual growth rate of 22% — something both Amazon and Microsoft would be more than happy to keep up with. Their current revenues combined are just one-sixth of what the market is expected to reach.

"AWS has the clear lead as reported by Cloudscene," Credit Suisse analyst Sami Badri wrote in a note. "However, we believe there is more than enough demand for the other players to benefit as well."

Amazon's stock price has gained 72% over the past year while Microsoft's has climbed 42%.

SEE ALSO: This college student’s viral LinkedIn post got her a Microsoft internship — and congratulations from the CEO of Microsoft

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NOW WATCH: Microsoft President Brad Smith says the US shouldn't get 'too isolationist'

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12. What correction? $6.3 trillion manager BlackRock just boosted its outlook on US stocks15:00[−]

trader happy

  • BlackRock raised its outlook on US stocks to overweight from neutral, citing the positive effect of fiscal stimulus on earnings growth.
  • The firm notes the ratio of upward profit revisions for US companies relative to downward ones is the highest since 1988.


On the heels of the stock market's first 10% correction in two years, BlackRock has turned positive on US equities.

Enticed by the earnings growth that should result from tax cuts, the $6.3 trillion investment firm raised its outlook on US stocks to overweight from neutral.

By BlackRock's measure, the number of US companies getting upward earnings revisions outpaces those getting downward adjustments by a ratio of more than 2-to-1. That's the highest on record, according to data going back to 1988.

The revision ratio "confirms that the fundamental momentum is really in place for the US," Kate Moore, the chief equity strategist for BlackRock, told Business Insider by phone. "We've been waiting for greater real data on the impact of tax cuts and fiscal stimulus on potential earnings before we made an assessment on the US. We can't deny that the US — which was already in very good shape — has been super-charged by this stimulus."

Screen Shot 2018 02 16 at 4.21.14 PM

Of course, any investors who found the stock market too expensive before were aided by the sharp selloff seen in major indexes the week before last. As traders sold their stocks amid inflationary concerns and spiking bond yields, the entry point for investors got more appealing.

"The timing is helped by the weakness in the market we saw the week before last," said Moore. "We saw a multiple contraction during that period. But the evolution of our call is all about the earnings story."

Still, BlackRock notes accelerating inflationary pressure could hurt margins, while increasing real rates may also reduce multiples. But the firm retains a high conviction when it comes to its equity call.

"We see the tax windfall providing an earnings buffer against these forces," Richard Turnill, BlackRock's global chief investment strategist wrote in a client note.

SEE ALSO: BlackRock is using robots to better predict the future of the economy

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NOW WATCH: Microsoft President Brad Smith says the US shouldn't get 'too isolationist'

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13. JPMORGAN: Bitcoin miners are in a 'hash rate arms race'01:25[−]

Representation of the Bitcoin virtual currency standing on the PC motherboard is seen in this illustration picture, February 3, 2018. REUTERS/Dado Ruvic/Illustration

  • Bitcoin mining is becoming more expensive, according to JPMorgan.
  • That's because miners are "currently in a hash rate arms race."


Bitcoin miners are in an arms race that is driving the cost of minting new bitcoin to all-time highs.

That's according to a big report on cryptocurrency out Friday by the financial giant JPMorgan.

Miners are the folks who unleash new bitcoin into the universe by running computationally intensive algorithms on systems called rigs. The miners pumping out the most computing power — or "hash rate," referring to how many cryptographic calculations the machines can do each second — have the best chance of earning a new bitcoin. As such, miners are building more and more rigs to one-up their competition.

"The industry is currently in a hash rate arms race, as the current bitcoin price is incentivizing the addition of more and more mining capacity," the report said.

That doesn't mean more bitcoins are being created. The cryptocurrency's network is designed to increase the difficulty of successfully mining a coin as the total hash power increases to maintain a more or less steady rate of bitcoin creation. More hash power means higher energy costs. As such, the cost to mine one bitcoin has increased dramatically.

"If this growth in hash rate continues (as it likely will if margins stay positive) without an offsetting increase in energy efficiency of miners, average costs globally will continue to rise," the bank found.

Already, the bank estimates the price of mining one bitcoin has jumped tenfold over the past year.

The bank estimates that the price to mine a single bitcoin is approximately $3,920. That varies depending on geography and energy costs, however. Take a look at the chart:

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SEE ALSO: JPMorgan explains why a bitcoin ETF is a 'holy grail' that could change the game

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NOW WATCH: We asked Jamie Dimon why JPMorgan is forming a new healthcare company with Amazon and Berkshire Hathaway — here's what he said

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14. We talked to JPMorgan CEO Jamie Dimon about the bank's $20 billion investment in the US, the economy, and why he won't run for officeВс., 18 февр.[−]

FILE PHOTO: Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. speaks during the Milken Institute Global Conference in Beverly Hills, California, U.S. on May 1, 2017. REUTERS/Mike Blake/File Photo

  • Business Insider caught up with JPMorgan Chase CEO Jamie Dimon on Tuesday in the South Bronx, where the bank was announcing the expansion of its Entrepreneurs of Color Fund.
  • We asked him about inflation concerns, the bank's five-year, $20 billion investment in the US, and its healthcare initiative with Amazon and Berkshire Hathaway.
  • He also talked about the role corporations had to play in their community, saying as long as the bank was doing well "we always participate in the community, just like if you owned a corner bakery store, you would participate in the community."
  • We also asked him why he had said he wouldn't run for political office. "I just don't think it's my nature," he said. "It's not what I've been trained to do — I've never run for office, I've never thought of things like that, so I think you have to be a sort of kind of person to be a politician."


Jamie Dimon is pleased with the economic progress the US has made in recent months. But there's still more to do.

Business Insider caught up with the JPMorgan Chase CEO on Tuesday in the South Bronx, where the bank was announcing the expansion of its Entrepreneurs of Color Fund. He talked about the fund, JPMorgan's big bet on brick-and-mortar bank branches, and wages. The bank in January announced plans to raise wages for 22,000 US employees who work in its branches and customer-service centers, as part of a $20 billion investment in its US business.

He also discussed the US economy, highlighting faster-than-expected growth and rising wages. But he said there was still a lot more to do, especially around infrastructure and education.

"America is still the greatest country on the planet," he said. "You know I get to travel the world and see all that. That does not mean we don't have some serious issues we have to fix."

The following is a lightly edited transcript of the conversation.

Matt Turner: You're here to announce funding for an Entrepreneurs of Color Fund here in the South Bronx. Why are these schemes so necessary, do you think?

Jamie Dimon: So, we started this when we went to Detroit, and we were trying to help the city of Detroit. And when you look at what cities need, affordable housing, jobs, work skills — my wife is working hard on work skills under a foundation called Here to Here.

But obviously one of the things is to get small businesses up and running and vibrant. So, a lot of minority entrepreneurs don't have the backup money they need. And sometimes you get a city contract, you get a special kind of loan, to help them grow and to come and grow locally. So, hopefully this funding here will kind of start the process and help accelerate local lending.

Turner: We sat down not far from here in May in the South Bronx when you announced some funding for a skills initiative. A lot has changed since May. What has changed for the better in that time, do you think?

Dimon: We went to the Alfred E. Smith School, and I hope that people watch it. There are some great schools teaching kids great things — they have jobs when they get out earning $40,000, $60,000 a year.

Jamie DimonSo since we last met I guess in May, the global economy has been growing faster than people thought. The American economy has been growing faster than people thought. That's a good thing. And it's hopefully leading to wage increases and obviously jobs.

I think it's going to entice more people back in the workforce. So I'm a little, people worry about too much low unemployment, I think it's good if you get more people working, I think it's a good thing.

Turner: And what hasn't changed? What are the areas where there's much still more work to do?

Dimon: Well I think, that's a big question. America is still the greatest country on the planet. You know I get to travel the world and see all that. That does not mean we don't have some serious issues we have to fix. And those issues are around infrastructure — we're unable as a community anymore to actually build proper infrastructure on a timely basis.

You know there's a bridge that connects Staten Island to New Jersey. It took 12 years to get the permits, and there's already an existing bridge which could've fallen down and hurt people. So infrastructure, education, I think competitive global taxation was important to get it done. You know, proper regulation.

staten islandIf you look at a lot of regulations, we get scored by the OECD — we've gone from being the least bureaucratic nation to one of the most bureaucratic nations. It stifles small-business formation. That's one thing. So if you look at small-business formation, it's lower than it's been in any other recovery. So I think a lot of these things hold back American growth. They've held back wages, they've held back jobs, they've held back incomes. And we have to ignite that to get things going again.

Turner: JPMorgan recently announced a five-year, $20 billion investment in the US. Can you just talk me through the thinking behind that? What led to that?

Dimon: So we said when tax reform is going to happen, it is going to increase the after-tax profits of US-based companies. It's going to bring a lot of capital back to the United States, which is an absolutely fabulous thing regardless of how that capital gets used. But we were thinking about what can we do to accelerate growth, both because of tax reform and regulatory reform, and we actually asked all of our people. It wasn't like I did it myself.

Everday Express branch JPMorgan ChaseWe're going to do more affordable housing. We're going to do more lending, little incremental lending, in LMI [lower- and middle-income] neighborhoods and mortgages. So making more mortgages to people, so make housing affordable to people. Small-business initiatives. So this small-business initiative is one of the ones we're doing. We're announcing today in San Francisco, we've tripled the one we're doing in Detroit. If these things work, we might actually do more. So there are more work-skill initiatives.

You know we have this thing called The Fellowship Initiative, we get kind of troubled minority kids in high school who may not get through and we want to get them through, give them a job, get them training, get them into college, and get them through college. And so now we're doing maybe 120 a year of that. So to the extent we can use some of this to help society, we want to do it.

We also very importantly increased wages, minimum wages, in the major cities to $18 an hour. That's $36,000 a year. And remember, our folks already get medical, full medical, full dental, pension, 401(k). So we try to take care of our people. And we also reduced the deductible for lower-paid employees, those making less than $60,000 a year, because we did all this research, and the people don't have the wherewithal to take care of a problem.

That problem could be your car needs to be fixed, but it also very often is medical. And so if you do your wellness stuff now, if you take care of yourself, if you don't smoke, we give you kind of benefits and the deductible effectively goes to zero. So we've kind of really made it easier for folks to get proper medical care.

Turner: In terms of the tax reform and regulatory reform, what was holding you back from doing that before, that investment? Is it that tax reform accelerated it and it was something you would've done eventually?

Dimon: We announced opening 400 branches and the regulators, the regulators weren't actually asking banks to expand. They wanted banks almost not to expand, and, therefore, with some regulatory reform, with tax reform, it gives you a lot of reason to say, 'You know what, let's be more ambitious and aggressive when growing.'

Boston Celtics fansSo we announced we're going to be opening 400 branches in cities we're not in, like Washington, DC, and Philadelphia and Boston. And when we go into a city, remember, we come in just like you saw here. It's not just that we have a branch, but we have small-business lenders there, we usually do philanthropy there, we usually have middle-market companies, private banking, credit card, mortgages, LMI. We put branches in LMI neighborhoods. So expansion's a good thing, and we're going to hopefully expand more in America.

Turner: You mentioned wages. You chose to do an hourly wage increase as opposed to the one-time bonuses a lot of other companies did. So what was your thinking behind that and doing it that way?

Dimon: We already had a one-time bonus. Years ago we put in place — we'd ask how many people don't put money into a 401(k) and therefore don't get the match. It was surprising, something like 40,000, 50,000 people. And they don't do it because they couldn't afford it. It wasn't because they didn't want the match. So when we found out that many, many years ago we started making contributions in their 401(k). Again folks making under $60,000 a year. So we're looking at more permanent wages and things that we could afford to do. And remember that opening those 400 branches is also 5,000 jobs.

Turner: I wanted to come to the branches in a moment. Just on the inflation aspect, because you mentioned it a moment ago, the market correction that we had last week was at least somewhat triggered by fears around inflation and wage growth that was higher than expected. How much of a concern should that be going forward?

Dimon: If you'd asked me in May, I would've told you that, sometime down the road, if we're going a little bit faster than we think, people are going to be afraid of wages and inflation. And it's kind of so predictable, OK? So the important thing is the higher growth.

wall street trader sadYou know, now you're climbing the wall of worry. OK, we have higher growth, wages may be going up, we all wanted it, but the flip side of that is that interest rates may go up and inflation may be a little higher than people think. I think the job growth and the employment growth is more important than that. Of course the markets always readjust to changing expectations, and now the expectations change. You also have central banks reversing the purchase of bonds, and those are legitimate concerns, but again, if you have jobs and wages, that's more important.

Turner: And in terms of the speed and severity of the correction last week, was that a concern for you?

Dimon: No.

Turner: Do you just think that's perfectly normal?

Dimon: I know it will shock your public. I spend almost no time worrying about something like that. We serve clients — markets fluctuate. Markets will always fluctuate. Markets have always fluctuated. You know, to me, again, the important thing's the economy. You know if you add inflation and then growth is declining, yeah, then you should be much more worried. But it's not about the stock market. It's about the people and their jobs.

Turner: You mentioned the branches. You're opening in 400 new locations. What was the thinking there? That seems like a contrarian bet when a lot of other people are closing branches right now. So what was the thinking there and what will those branches allow you to do going forward?

Dimon: Branches are still critical to business, OK? Remember, this may be surprising to some, but the average branch, 25% of the business is small businesses, literally from the immediate community, who need access to a branch, cash, currency, checks, etcetera.

The branches are getting smaller, so the nature of branch is changing. The amount of tellers is coming down, so the operational nature is changing. But you have more mortgage-loan officers, more small-business officers, more investment officers, helping people. So yeah, branches are important to opening accounts. Those are important to serving governments. If you can't take deposits locally, generally you can't serve the government locally, by law.

They're important to middle-market customers. They like to have a branch there for their employees and stuff like that. So, they're still a critical part. These branches we're talking about are in cities where we are not. So we're kind of, you know, we're expanding our wings a little bit and going to places we are not.

Turner: And you mentioned healthcare. JPMorgan has announced an initiative with Amazon and Berkshire Hathaway. How did that come about, and what are you hoping to achieve there?

Dimon: Look, America has an issue, OK? We spend 17% of our GDP in healthcare. You know we have the best of all worlds, some of the best healthcare in the world. And the worst of all worlds. We don't do very good preventive medicine. It costs too much. Warren Buffett calls it the tapeworm of corporate America.

Jeff Bezos AmazonGoing into deductibles was important to get you to shop a little bit but hasn't really worked really well. So I tell people, JPMorgan Chase already buys a billion and a half dollars of medical, and we're self-insured. Think of this — we're already the insurance company, we're already making these decisions, and we simply want to do a better job.

And in conversation with Warren, and someone who works for him called Todd Combs, who's one of my board members, who's exceptional, and Jeff Bezos, we said we know we can do more. We know we can do more just thinking through every single part of it. Both the customer-facing part so you might be able to get look at more data on your phone and stuff like that, getting you to do wellness.

I mean 20% of our medical expense is at end of life, and a lot of people don't want to go through it — they go through it in a hospital. So maybe we need a legal change of that. A lot of people overutilize certain medicines, but they also underutilize it. And, it's also silly they have no wellness. Like if you take care of yourself, I think smoking and obesity, I forgot the number, account for 25% of all medical expenses. Well that's us!

So you know, there are ways that when you face this maybe we can change things to make it much better for everybody. We want happier employees, better medical outcomes, and I do think at the end of the day that'll actually be cheaper.

Turner: There's a lot of talk right now about the role that corporations have to play in their communities, their responsibility to stakeholders beyond just shareholders, and to quote Larry Fink, the need for corporations to benefit society in some way. In what way are businesses stepping up? I know about JPMorgan's efforts here, but more broadly in the conversations you have with CEOs elsewhere, how are they stepping up?

Dimon: I think honestly these big companies have been doing this my whole lifetime. So I remember I worked at American Express when I was 26 years old, and all these companies take care of their people, they educate their people, they've been philanthropic.

Larry FinkIf you go to back to Chase and JPMorgan, you know 50 years ago they were among the first to do things like that, and to support medical benefits for employees, the first to support medical benefits for gay partners. Those are wonderful things. So of course you want to be a good community citizen.

And so I think all the companies do it — I don't know any big company who isn't pretty extensively involved in communities. They all do it their own way. We're experts in financing and affordable housing and things like that, but other companies are experts in technologies or drugs where they can bring different things to the population. I'm the chairman of the Business Roundtable, and there's a booklet we put out about all the things companies do on work-skills initiatives, technology initiatives, and it's pretty extensive.

Turner: Is there a perception gap there then? Just earlier Bronx Borough President Ruben Diaz said he wishes that what JPMorgan here was doing was contagious.

Dimon: Yeah. I think he means here. I think he means right here in the South Bronx, and sometimes, you know one company can accelerate something in one place, and yes, yes we should do that.

So I've never been conflicted between shareholder value, being a good community citizen, and I tell people if I don't run a good, healthy, vibrant company, all other bets are off. I mean, that is the number one thing. And that is the number one thing we do even here. Small business, consumers, loans, we finance companies, and I have to do that well.

But as long as we're doing that well we always participate in the community, just like if you owned a corner bakery store, you would participate in the community. You know, you might help your local synagogue, your local church, your local mosque, you might help the local Little League team, you might employ a couple kids over the summer to help restock the store or repaint it. That's, we all do that. That's called humanity.

It shocks me that people think that's a surprise that we should do that. Of course there's some businesses out there who're rapacious and you know it's all about how much money you're going to make, but that's, people are that way. There are some people, that's the way they are. It's all about the money. But most big companies aren't quite that way.

Turner: And you've mentioned the need for infrastructure investment. You mentioned it again earlier. The administration has come out with its plan: How confident are you that something gets done now?

Dimon: You know, first of all, let's talk about how bad it's gotten. If you analyze American infrastructure, we've gone from, I'm talking about 20 years ago, from among the best to among the worst of developed nations. And it's around regulations, bureaucracy, approval processes, financing processes.

U.S. President Donald Trump holds a meeting with members of Congress at the White House in Washington, U.S., February 13, 2018. REUTERS/Kevin LamarqueMy God, how did we like get like that? America, the can-do, wonderful nation of America? So we've got to fix it. It is a wide variety of things. So it's not just a budget. It's the permitting that needs to get done, it's the regulations around it, it's all these various things. So it's a big deal.

Studies have come out that literally say we need, I forgot the number, $3 trillion? But if we don't do the $3 trillion, it'll cost us more. OK, it's costing us more. And then if you believe in, you know, carbon pollution, the FAA, we don't have the system most other countries have where your flights will be 20 minutes less, and CO2 pollution would be 20% less. We can't seem to have the political will to do that. I mean, shame on us.

Turner: You've said repeatedly you don't want to run for office. Why do you think the question keeps on coming up, and why are you so insistent that the answer is no, that you don't plan to?

Dimon: I see the question come up with hundreds of people. I have lots of friends where it's come up for them too, and look, I just don't think it's my nature. It's not what I've been trained to do — I've never run for office, I've never thought of things like that, so I think you have to be a sort of kind of person to be a politician.

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NOW WATCH: Jamie Dimon isn't losing sleep over the stock market's biggest fear

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15. There's something about Trump's infrastructure plan that's eerily reminiscent of his real estate dealsВс., 18 февр.[−]

Trump Hard Hat

  • President Donald Trump's infrastructure plan is widely seen as committing far too few federal dollars — just $200 billion — to rebuild the country's outdated infrastructure.
  • Trump's budget also includes "deep cuts to programs in the same agencies that would receive new grant-making authority under his infrastructure proposal," according to Jacob Leibenluft, senior advisor at the Center for Budget and Policy Priorities.
  • Economist Paul Krugman says, "It's not a plan, it's a scam."


President Donald Trump’s latest infrastructure proposal appears to have something in common with his real-estate deals: The plan sounds super-sized, but the funds aren’t necessarily there to back it.

Trump, who made a career out of putting his name on major property deals without providing much upfront cash, says he wants to spur $1.5 trillion in new infrastructure investment, which most people agree the country desperately needs.

However, a quick look under the hood shows this mighty engine of economic growth has very little horsepower. The president envisions just $200 billion in federal spending he says will somehow generate another $1.3 trillion of investment from private firms as well as state and local governments.

In addition, the proposal comes alongside a budget that sharply cuts federal expenditures normally aimed at infrastructure.

That includes "deep cuts to programs in the same agencies that would receive new grant-making authority under his infrastructure proposal," writes Jacob Leibenluft, senior advisor at the Center for Budget and Policy Priorities, a nonpartisan research group in Washington, in a blog post.

"At its core, the President’s approach is a bait and switch that would cut federal support for infrastructure over the long term."

Paul Krugman, the Nobel-winning economist and New York Times columnist, describes the plan in scathing terms: "Donald Trump doesn’t give a dam. Or a bridge. Or a road. Or a sewer system. Or any of the other things we talk about when we talk about infrastructure."

"It’s not a plan, it’s a scam," he added. "The $1.5 trillion number is just made up; he’s only proposing federal spending of $200 billion, which is somehow supposed to magically induce a vastly bigger overall increase in infrastructure investment, mainly paid for either by state and local governments (which are not exactly rolling in cash, but whatever) or by the private sector."

Reliance on states and municipalities, as well as the private sector, for the bulk of funding carries its own set of perils.

The liberal Economic Policy Institute in Washington said in a statement that "continuing to kick the problem to state and local governments won’t solve anything."

As for private sector involvement, EPI says firms "will not build infrastructure for free, but will expect a return on investment. That means state and local governments will have to pay for the infrastructure with taxes, tolls, or other user fees.

"And if state and local governments predictably dodge the task of financing and funding projects directly, public-private partnerships come with their own set of problems, as natural monopoly characteristics can leave the private partner in a position to hike tolls and degrade service quality."

SEE ALSO: Trump passed up a huge opportunity to give Americans an economic boost when he chose to focus on tax cuts

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NOW WATCH: Elon Musk explains the one thing that went wrong with SpaceX's Falcon Heavy flight

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16. BlackRock is using robots to better predict the future of the economyВс., 18 февр.[−]

robot artificial intelligence AI

  • BlackRock's Macro GPS tool is designed as an improvement to traditional economic indicators, and is intended to give investors a more forward-looking outlook.
  • The firm is using the big data quantitative insights provided by its Systematic Active Equity team to further hone the GPS indicator.


Economic data can be a double-edged sword for investors.

Sure, it serves an valuable input for traders deciding where to put their money, but it's also largely backwards-looking. So while it's undoubtedly useful, it's often up to investors to calibrate their own economic outlook.

BlackRock realizes this, and is here to help.

The $6.3 trillion investment behemoth is offering a proprietary indicator called the BlackRock Macro GPS, which is designed to swing economic forecasts forward and provide more actionable information for investors. Officially, the tool's purpose is to "show where 12-month forward consensus gross domestic product (GDP) forecasts may stand in three months’ time."

In other words, it's trying to give investors a heads up about any potential economic shift.

And it's an improvement on the old model in multiple ways, including the number of data sources from which it pulls. BlackRock specifically looks at indicators like realized activity, employment, sentiment, and survey data, among others. In the end, the GPS is looking to build on models developed by academics, central banks, and other financial institutions.

However, perhaps the most novel attribute of the GPS is how it factors in so-called "big data" findings. Calling on its Systematic Active Equity team — which uses quantitative techniques to process massive amounts of data — the GPS squad is able to overlay hugely valuable analysis on top of its core economic findings.

"We often found that we were getting conflicting signals," Jean Boivin, PhD, head of economic and markets research at the BlackRock Investment Institute, told Business Insider by phone. "It wasn’t clear how much weight we should’ve been assigning to the more traditional sell-side indicators, relative to our own proprietary big data signals. That led us to try a more systematic way of marrying these inputs into one indicator."

So what kind of big data capabilities does BlackRock's Macro GPS have? For one, it mines the transcripts of corporate manager conference calls to assess the tense being used. Boivin notes that they like to look at the ratio of future tense to past in order to predict what kind of investing companies will do in the future.

The GPS also factors in elements like satellite images and traffic patterns. For example, Boivin says the Systematic Active Equity team is currently working to use shadow measurements for buildings to analyze the speed and progress of construction activity in China. While not officially part of the GPS yet, the initiative shows the ambition and scope of what the team is doing.

"It's something that's getting more and more traction," Boivin said of the GPS. "We’re not aware of anything that marries all of this data in the way we are."

As of right now, BlackRock offers the GPS for the US, UK, Germany, France, Italy, Spain, Japan, and Australia. But it doesn't plan to stop there. The firm wants to eventually enter emerging markets like China — perhaps using the shadow-measuring technique. It's all part of the firm's plan to give traders better and more actionable economic data.

"We have our sights set on the EM bloc, which is the next step," said Boivin. "But our primary focus right now is becoming an even more innovative source of data."

SEE ALSO: Morgan Stanley's US equity chief explains why the recent meltdown signaled the 'final stage' of the bull market

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NOW WATCH: Microsoft President Brad Smith says the US shouldn't get 'too isolationist'

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17. Warren Buffett just made life miserable for one group of investorsВс., 18 февр.[−]

warren buffett sits back

  • Warren Buffett and Berkshire Hathaway disclosed an almost $400 million stake in Teva Pharmaceutical after the market close on Wednesday, sending the shares soaring.
  • The big stock increase crushed short sellers, who were sitting on a position of more than $1.2 billion when the news hit.


Warren Buffett's almost $400 million investment in Teva Pharmaceutical made a lot of investors quite a bit of money Wednesday as the company's American deposit receipts surged 11% in after-market trading.

Another group, however, wasn't quite so fortunate.

We're talking about short sellers, the investors betting on a Teva stock decline. As of Wednesday's close, prior to Berkshire Hathaway's disclosure, they held a roughly $1.2 billion short position on the company — one that proved to be a sitting duck once Teva shares started surging.

It's a cruel twist of fate for Teva skeptics, considering they've nearly doubled their short position over the past six months, according to data compiled by the financial-analytics firm S3 Partners.

2 15 18 teva short COTD

An unwinding of these positions — also known as a short squeeze — is most likely exacerbating the move in Teva's share price as traders are forced to close their positions by buying the stock.

So why was there so much money riding on a Teva stock collapse? One possible explanation for the increase in short interest is that traders saw Teva's 66% decline over the past two years and viewed the stock as a sinking ship. Short interest normally falls as a stock price does, so it's interesting that investors continued to pile into those bets.

It's also possible that traders have become wary of mounting competition. In October, Teva's blockbuster multiple-sclerosis treatment Copaxone suffered through a rough patch as US regulators approved discounted pricing for generic competitors, while two European companies received approval for their own generic version of the drug.

Buffett's investment in Teva is just one entry into what many expect will be a busy year for the legendary billionaire. UBS recently speculated that the company could make an enormous acquisition of up to $160 billion, considering how much cash Berkshire Hathaway has on hand and how much cash flow it generates.

Teva climbed 9.2% in US premarket trading on Thursday.

Screen Shot 2018 02 15 at 9.02.57 AM

SEE ALSO: ALBERT EDWARDS: There's a hidden risk that could accelerate the collapse of the market's long-running 'financial Ponzi scheme'

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NOW WATCH: Microsoft President Brad Smith says the US shouldn't get 'too isolationist'

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18. GOLDMAN SACHS: These 17 stocks offer the best bargains in the market right nowВс., 18 февр.[−]

bargain sale shopping buying

  • The equity market correction has created plentiful opportunities in stocks that are now trading at their most attractive valuations in months.
  • Goldman Sachs has singled out the 17 companies that are the most mispriced, relative to their beta-implied return since the selloff started.


Big selloffs create big opportunities.

It's a tried and true tenet of the stock market, and one that's highly relevant to the situation currently unfolding in markets on the heels of recent turbulence. With all major US indexes fresh off 10% corrections, many single stocks are far more attractively priced than they've been in recent months.

And according to Goldman Sachs, investors want to keep buying stocks. In a client note from late last week, the firm said that conversations with clients have revolved more around what to buy, rather than what areas to flee.

On a sector basis, Goldman recommends cyclical ones like materials and industrials. But which single stocks offer the best deals?

To figure this out, Goldman ran a screen for buy-rated companies that have lagged the most relative to their beta-implied returns since the stock selloff began in earnest on January 26. In other words, it located the market's biggest bargains.

Without further ado, here are the 17 stocks that best fit the bill, arranged in increasing order of how much they're trailing those implied returns:

17. McDonald's

Ticker: MCD

Industry: Consumer discretionary

Market cap: $127 billion

Performance since January 26 vs. beta-implied returns: -4 percentage points



16. Alphabet

Ticker: GOOGL

Industry: Information technology

Market cap: $603 billion

Performance since January 26 vs. beta-implied returns: -4 percentage points



15. Molson Coors

Ticker: TAP

Industry: Consumer staples

Market cap: $16 billion

Performance since January 26 vs. beta-implied returns: -4 percentage points



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19. ALBERT EDWARDS: There's a hidden risk that could accelerate the collapse of the market's long-running 'financial Ponzi scheme'Вс., 18 февр.[−]

building demolition

  • Notoriously bearish Societe Generale strategist Albert Edwards used Wednesday's surprisingly strong inflation data to argue a market reckoning is imminent.
  • He's particularly worried about a possible breakout in the Japanese yen versus a US dollar that's already weak and being blamed for worsening inflationary pressures.


One of Wall Street's most outspoken bears used Wednesday's surprisingly strong inflation data as an opportunity to criticize what he sees as "ludicrously timed" fiscal stimulus.

That would be Societe Generale's notoriously pessimistic investment strategist Albert Edwards, who didn't mince words in a note sent to clients.

"US wage and price inflation are rising briskly, putting intense downward pressure on financial markets," he wrote. "Yet another Fed-inspired financial Ponzi scheme now looks set to collapse into the deflationary dust."

At the root of Edwards' argument is the idea that the sweeping tax cuts made by President Donald Trump are, as he describes, the "singularly most irresponsible macro-stimulus seen in US history." He says markets are scared of further rate hikes from the Federal Reserve at a time when the government's debt burden is growing, and suggests the central bank is being blinded by a growing economy.

Yet while market observers are closely monitoring technical thresholds on the 10-year Treasury yield, Edwards says many people are missing the glaring risk of a Japanese yen breakout versus the US dollar.

He points out speculative investors have a huge short position on the USD-JPY cross, which arrives at a time when the pair is hovering near a key technical level. Edwards says the yen could spike versus the dollar once the trendline below is "definitively broken," fueling more weakness in the greenback — something that's already seen as worsening inflationary pressures.

Screen Shot 2018 02 14 at 12.21.47 PM

"The yen, which no-one is focusing on, makes me more nervous," said Edwards. "In the near term, this is the one that might yet catch global markets out."

To be sure, Edwards is always pointing to some new headwind as the one that could possibly send markets tumbling into oblivion. Just three months ago, he sounded the alarm on strong-balance-sheet companies outperforming those with weaker finances. He's even argued Americans take too much vacation — and highlighted that as a major market risk.

Ultimately, his warnings should be taken with a grain of salt, but there are also important findings buried in his inflammatory prose. And right now, fiscal stimulus has drawn his ire.

"The outcome of this front-end loaded stimulus package is patently obvious," he said. "It will rapidly accelerate the end of the economic cycle."

SEE ALSO: The stock market's worst-case scenario is playing out

Join the conversation about this story »

NOW WATCH: Microsoft President Brad Smith says the US shouldn't get 'too isolationist'

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20. Goldman Sachs CEO gives Trump credit for the economy, says it's better than if Hillary Clinton won (GS)Вс., 18 февр.[−]

Goldman Sachs CEO Lloyd Blankfein

  • Goldman Sachs CEO Lloyd Blankfein told CNNMoney that the economy is better off under President Donald Trump than it would have been under Hillary Clinton.
  • Blankfein noted he had supported Clinton's White House bid.
  • Business confidence has surged under Trump as the administration has cut corporate taxes and pledged to roll back regulations.


The US economy is better off under President Donald Trump that it would have been under Hillary Clinton, according to Lloyd Blankfein, the CEO of Goldman Sachs.

"If the president didn't win and Hillary Clinton won ... I bet you the economy is higher today than it otherwise would be," Blankfein said in an interview with CNN's Christine Romans.

Blankfein had backed Clinton's bid for the White House.

Two days before Trump's inauguration, he linked Wall Street's newfound confidence to Trump, but fell short of giving him full credit. "I think one of the reasons why the election had such a dramatic effect is because it was drawing people in the direction that it was already heading," Blankfein told CNBC from the 2017 World Economic Forum in Davos, Switzerland.

Economic growth has remained strong since Trump took office in November 2016, and hit his 3% target in two quarters last year. Business leaders' confidence has been bolstered by corporate tax cuts and pledges by the Trump administration to roll back regulations.

And now, there's concern about higher inflation, partly because of the new administration's fiscal stimulus.

Blankfein added that he was talking about the economy, "not other things." He's taken to Twitter to criticize Trump about some of those "other things," including the president's reported description of Haiti and African countries. " ... despite all the sh*t, American values will shine through," he tweeted last month.

Head over to CNNMoney for more »

SEE ALSO: Wall Street needs to brace for an even bigger inflation scare

Join the conversation about this story »

NOW WATCH: Microsoft President Brad Smith says the US shouldn't get 'too isolationist'

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