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1. BoA saving billions on the cloud; the Kabbalah connection14:15[−]

Hi, folks.

Friendly neighborhood hedge-fund reporter Bradley Saacks here pinch-hitting for Olivia and Meredith.

We here at Business Insider, like many other organizations, spend a lot of time thinking, reporting, and writing about who's next — the next CEO of a major bank, the next big unicorn founder, the next hedge-fund billionaire.

Last week, we rolled out our annual list of people rapidly shifting from "next" to "now" with our rising stars of Wall Street list, and the fun didn't stop there. This week, we told who's next at Apollo's $77 billion private-equity business.

As my colleague Casey Sullivan wrote, the two Apollo veterans tasked with putting that massive pool of money to work are David Sambur and Matt Nord, a 39-year-old and a 40-year-old, respectively, who were described as some of the most "Apolloesque" dealmakers within the firm in Casey's story. Still, while they may be trained in Leon Black's contrarian style and have no plans to change how the firm invests, the duo told us they may need to be more transparent in communicating the firm's PE deals and investment strategy.

Political pressure, primarily from progressive presidential candidates Elizabeth Warren and Bernie Sanders, have painted PE as an industry that is "sucking the value out of our companies," as Warren recently tweeted.

Warren has said that PE firms take over companies, load them with debt, strip assets, and then walk away — rich from huge management fees — when they go bankrupt. She has proposed legislation that would bring a 100% tax on fees earned by private-equity firms and create laws to protect workers' financial interests in the event of bankruptcies.

As we barrel toward the Democratic primaries and the 2020 election, further demonization of Wall Street is to be expected. The big question I have: Will any of these negative headlines around private-equity takeovers leading to massive job cuts actually change the way that deals get done? If a Democrat is elected and makes life so difficult for some of these firms, is there going to be a tipping point where the entire model needs to change?

As always, below is a selection of stories from around the newsroom that we have curated especially for you, the dedicated reader and supporter of Business Insider Prime. Please send newsletter-related compliments, tips, and complaints to me this week at bsaacks@businessinsider.com. And thanks for reading!

—Bradley


Bank of America's CEO says that it's saved $2 billion a year by ignoring Amazon or Microsoft and building its own cloud instead

Bank of America has bucked the Wall Street trend by building its own private cloud software rather than outsourcing to companies like Amazon, Microsoft, and Google.

The investment, including a $350 million charge in 2017, hasn't been cheap, but it has had a striking payoff, CEO Brian Moynihan said during the company's third-quarter earnings call.

He said the decision helped reduce the firm's servers to 70,000 from 200,000 and its data centers to 23 from 60, and it has resulted in $2 billion in annual infrastructure savings.

READ MORE HERE »

Merrill Lynch is shifting how it handles staff who drop out of its financial adviser trainee program, and it highlights the industry's evolving career paths

Financial advisers-in-training at Bank of America's wealth-management arm who exit the trainee program without becoming full-fledged advisers are more commonly transitioning to different roles within the firm instead of leaving altogether, according to Andy Sieg, the head of Merrill Lynch.

That shift underscores financial advisers' evolving career paths. Some recruiters and experts describe an increasingly difficult environment for wealth advisers across the industry as the business of wealth management has become more competitive and crowded with countless digital, self-directed options.

Firms may be more "open to the idea of possibly finding something that would be a better fit" than they were in the past, one wealth-management recruiter told us.

As Business Insider first reported, Merrill Lynch hiked trainee financial advisers' starting salaries by $10,000 earlier this year as it looks to attract new talent.

READ MORE HERE »

Goldman Sachs unloaded some of its WeWork shares before its investment bankers pitched investors on what it once considered a $60 billion IPO

Goldman Sachs sold some of its stake in WeWork even as the investment bank was pitching the coworking company for a highly lucrative IPO mandate.

The bank unloaded shares at two earlier fundraising rounds when the WeWork mega-investor SoftBank gave employees and earlier investors a chance to sell their stake, according to a person with knowledge of Goldman's actions.

WeWork set the price of those sales. The bank assigned a "much more modest" valuation to the company than the $47 billion value set earlier this year, or the $61 billion to $96 billion range the firm's investment bankers told the company's top execs it might get in an IPO.

READ MORE HERE »

Elite law firm Irell & Manella — where partners make more than $3 million a year — is seeing turbulence and departures after merger talks with a rival firm fell apart

Irell & Manella, an elite California law firm that's arguing a case before the US Supreme Court, has experienced an exodus of partners after entering and exiting merger discussions in recent months, Business Insider has learned.

Since August, Irell has seen the departures of its managing partner as well as the heads of its global investigations and restructuring practices.

The situation marks a tumultuous period for one of the US's most prestigious litigation firms, where lawyers are known for charging as much as $1,750 an hour. Its swashbuckling leader, Morgan Chu, is considered one of the most prolific trial lawyers, and firm clients include United Talent Agency, Warner Brothers, and Uber.

The revelations help explain how the firm, where partners earn more than $3 million a year, on average, is squinting to see a clear picture of its future.

READ MORE HERE »

The Kabbalah connection: Insiders say a celebrity-centered religious sect deeply influenced how Adam Neumann ran WeWork before its spectacular collapse

As Adam and Rebekah Neumann built WeWork into a $47 billion coworking giant, the couple relied on the teachings of the Kabbalah Centre, a spiritual organization whose high-pressure donation tactics have drained multiple former members' bank accounts, sources told Business Insider.

Kabbalah Centre Rabbi Eitan Yardeni was a regular sight at WeWork offices, where former employees said he helped put together at least one deal, met with company executives, and, in at least one instance, spoke with the entire company as a "spiritual counselor."

In conversations with Business Insider, former Kabbalah Centre members said Yardeni pressured them into making large donations to the religious sect, telling them that their spiritual health depended on it.

READ MORE HERE »

How the largest and most powerful Wall Street banks are cautiously opening their doors to the potentially $80 billion US cannabis industry

Some of the largest Wall Street banks are starting to sniff around the cannabis industry, despite THC being federally illegal.

Goldman Sachs, JPMorgan, and Credit Suisse have helped cannabis-related SPACs go public in the US and have advised existing clients on cannabis-related deals, though they're careful to stay on the right side of US federal law.

READ MORE HERE »

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2. 'Bigger than the housing bubble': One market expert breaks down why the next US economic meltdown will be even worse than the last13:05[−]

trader upset stock market crash

  • Peter Schiff, the outspoken CEO and president of Euro Pacific Capital, has a stark warning for investors who think the Federal Reserve will be able to bail out the US economy.
  • Schiff says the Fed has lost all credibility, and that exploding debt levels and massive deficits will be too much for the dollar to handle.
  • He's predicting: stagflation, rising rates, and a deep recession even worse than the last.
  • Click here for more BI Prime stories.

There's no denying that the housing bubble of the 2000s was the most severe economic event to roil the world since the Great Depression.

Excessive leverage, risky lending practices, and overexuberance almost brought the entire financial system to its knees. But the world was able to side-step economic disaster through emergency government and central bank action.

And although the US economy has been humming along ever since, some are convinced that the policies put in place during the recovery are going to be responsible for an even bigger collapse.

One such man is Peter Schiff, president and CEO of Euro Pacific Capital, who says the US economy is nearing judgment day.

"The bubble that the Fed inflated this time is far bigger than the housing bubble," he said at The MoneyShow Las Vegas, a recent financial-markets conference. "The economic collapse that is going to follow the bursting of this bubble is going to far more dramatic."

If this sounds familiar, it's because Schiff has danced this dance before.

He saw the same low-rate hubris leading up to both the tech and housing bubbles — and he says the similarities to today's situation are too uncanny to ignore. In his opinion, rates were kept too low for too long, which led to excessive risk taking and eventual collapse.

Still, the Federal Reserve was waiting in the wings, waiting to mop up the ensuing economic mess that resulted, in his opinion, of their own doing.

Why this time is different

But this time it's different — and Schiff is quick to demonstrate his thinking.

"Everybody started to believe the Fed," he said. "But the belief that the policy worked was completely predicated on the fact that is was temporary and that it was reversible — that the Fed was going to be able normalize interest rates and shrink its balance sheet back down to pre-crisis levels. "

That's an important distinction. To Schiff, the Fed's policies are neither temporary nor reversible — and over time, he thinks they've proved him right.

For context, the Fed's balance sheet is currently hovering around $4 trillion, nowhere near where it was pre-crisis. In fact, it's roughly $3 trillion higher.

The graph below depicts the total assets held by the Federal Reserve since late 2002.

Board of Governors of the Federal Reserve System (US)

What's more, the Fed's path to interest rate normalization was cut short by an unruly stock market.

"They had raised interest rates to the point where the markets could no longer handle it," he said. "How high did we get? Two and a quarter? Two and a half?"

He continued: "Is that normal? No! It's not even close to normal."

Schiff thinks markets have been duped. These policies are seemingly here to stay — something he believes makes the Fed much less credible. And if no one trusts the Fed, no one is going to bank on them pulling the US economy out of the doldrums.

"Nobody is going to believe that it's temporary," he said. "Nobody is going to believe that the Fed has this under control — that they can reverse this policy."

But that's not all.

He also thinks that sky-high deficits and exploding debt levels are going to make it nearly impossible for the dollar to retain it's purchasing power — and once that domino falls, he expects all hell to break loose.

"The dollar is going to crash," he concluded. "And when the dollar crashes, it's going to take the bond market with it, and we're going to have stagflation, we're going to have a deep recession with rising interest rates, and this whole thing is going to come imploding down."

SEE ALSO: Legendary investor Peter Borish describes how effective investing is like being a successful baseball manager — and shares his top trade for an economy wracked with record debt

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3. One chart shows how steep of a decline there's been in the percentage of children outearning their parents since the 1940sПт., 18 окт.[−]

college graduates

  • An American child born in 1945 had over a 90% chance of outearning their parents when they became adults.
  • But fast-forward four decades, and a person born in the 1985 had only a 50% chance of faring better than them.
  • As Stanford economics professor Raj Chetty put it, "It's basically a coin flip as to whether you'll do better than your parents."
  • Stanford researchers found in a 2016 study that the main driver of the plummeting economic prospects for Americans was the widening gap between the rich and everyone else.
  • This chart shows that the American Dream is now farther out of reach for a substantial portion of the population.
  • Visit Business Insider's homepage for more stories.

An American child born in 1945 had a more than 90% chance of outearning their parents when they became adults. But fast-forward four decades, and a person born in the 1985 had only a 50% chance of faring better than them, a stark reversal.

As Stanford economics professor Raj Chetty put it, "It's basically a coin flip as to whether you'll do better than your parents."

In a 2016 study, Chetty and other Stanford researchers found that the main driver of the plummeting economic prospects for Americans was the widening gap between the rich and everyone else. This chart shows that the American Dream is now farther out of reach for a substantial portion of the population.

Read more: US income inequality jumps to highest level ever recorded

The researchers also found swaths of the country where chances of moving from the bottom fifth to the top fifth of income levels, and they called for policies that "foster more broadly shared growth."

Additional research from the Brookings Institution has also shown that "the middle class suffered greater losses of absolute mobility than those at the top or bottom" since the 1960s. What had also propelled the prospects of children born in the 1940s — and made outearning your parents a near-certainty — was the postwar economic boom the middle-class enjoyed.

Income inequality in the United States last year reached the highest level in a half-century with the wealthiest Americans reaping some of the biggest economic gains, according to the US Census Bureau.

New research from economists Gabriel Zucman and Emmanuel Saez backs it up, as they found that billionaires last year paid lower income taxes than the working class.

SEE ALSO: Nancy Pelosi's bill to lower prescription drug costs would save Medicare a whopping $345 billion over 7 years, CBO says

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4. The Reddit geek who raked in $100,000 with 2 trades is 'taking a small break'Пт., 18 окт.[−]

reddit sf steve huffman 1

  • The Reddit geek who raked in more than $100,000 with two trades is taking a break from investing.
  • Eddie Choi turned less than $800 into nearly $108,000 by purchasing puts on Roku stock and SPY — the S&P 500 exchange-traded fund — then profiting enormously when they fell, Bloomberg reported.
  • Choi returned to WallStreetBets, the subreddit where he learned to trade options, to share the Bloomberg story and reply to comments about his watchlist, investing approach, and the significance of the windfall to him.

The Reddit geek who raked in more than $100,000 with two trades is taking a break from investing.

Eddie Choi turned less than $800 into nearly $108,000 by purchasing puts on Roku stock and SPY — the S&P 500 exchange-traded fund — then profiting enormously when they fell, Bloomberg reported. He learned how to trade options on WallStreetBets, a subreddit with the tagline "Like 4chan found a Bloomberg terminal."

Choi, whose Reddit username is TheTriviaTribe, returned to WallStreetBets to share the Bloomberg story in a thread titled, " I Did It!" He also answered several questions in the comments.

"I'm taking a small break from heavily looking at stocks, but I love them tech stocks," he responded to a query about what's on his watchlist. "It's a bit weird not trading options anymore, but I'm sure I'll do it again sometime in the near future!"

One commenter proclaimed his win was a victory for bears. Choi replied: "I'm not bull or bear. I follow the overall market and some stocks, and decide if I'll be bear or bull for the next day to week for the overall market or a specific stock."

The same commenter asked whether the cash influx changed his life. "It didn't change my life because it's not like these gains are totally life changing, but I don't have tons and tons of money, so it's not like it was nothing for me," Choi replied. "I do have high goals for my future though! Career wise."

Choi also cracked a few jokes in the comments.

"Taxes are for chumps. Haha just kidding. Of course I'll pay my taxes."

Markets Insider has reached out to Choi for more details about his investing. We will update this story if we hear back.

Read more: Nobel laureate Robert Shiller wrote the textbook on the 2 worst bubbles in recent history. Now he tells us his best advice for avoiding the next big one.

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5. Boeing slides on report that employees may have misled the FAA on the doomed 737 Max (BA)Пт., 18 окт.[−]

Boeing 737 Max

  • Shares of Boeing traded as much as 4% lower Friday after Reuters reported that employees of the airplane manufacturer may have misled the Federal Aviation Administration in 2016 regarding the 737 Max.
  • Boeing reportedly turned over internal messages between two employees to the FAA that suggest the company may have lied about a key safety system on the 737 Max.
  • According to Reuters, the FAA said on Friday the messages were "concerning" and that it was working to "determine what action is appropriate."
  • Watch Boeing trade live.

Boeing's stock price slid as much as 4% Friday on a report that the airplane maker may have misled the Federal Aviation Administration in 2016 regarding the 737 Max.

According to Reuters, Boeing turned over internal messages between two employees to the FAA that show the company's employees may have lied about a key safety feature on the grounded aircraft model.

The messages refer to the performance of the MCAS anti-stall system, which has been connected to the two fatal 737 Max crashes that resulted in 346 deaths. The system malfunctioned during both flights and sent the planes into irreversible nose dives.

According to The New York Times, pilot Mark Forkner complained in the messages that the system wasn't working properly.

"Granted, I suck at flying, but even this was egregious," Forkner said in the messages, according to The Times.

Forkner added: "I basically lied to the regulators (unknowingly)."

The FAA told Reuters the messages were "concerning" and that the agency "is reviewing this information to determine what action is appropriate."

Shares of Boeing are up about 10% year-to-date.

Read more: GOLDMAN SACHS: These 5 trades can help investors make a killing during a crucial earnings season

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6. A questionable theory about 'shady' stock trades and Trump reveals how desperate people are for news they want to hearПт., 18 окт.[−]

Trump stock market

  • A Vanity Fair story alleged to show shady trading in the stock futures market that happened just before major headlines involving President Donald Trump's trade war with China.
  • By linking supposedly shady trades to Trump, the story gained widespread attention.
  • But the claims about the trades made in the story make little sense and appear to be typical futures trading activity.
  • The virality of the story shows how people are willing to believe flimsy claims if they confirm their priors, especially when it comes to Trump.
  • George Pearkes is the global macro strategist for Bespoke Investment Group.
  • Visit Business Insider's homepage for more stories.

This week Vanity Fair readers were treated to a claim that by simply reading the futures tape they could see clear evidence of financial wrongdoing by someone connected to the Trump administration. Those claims are ridiculous and suckered in readers desperate to have their assumptions about wrongdoing by Trump administration officials confirmed.

The claims of 'shady trades' make no sense

In the article, William D. Cohan identifies four distinct instances where late-session futures trades turned out to be very profitable for whoever put them on.

It took me a bit of puzzling to understand what exact blocks of trades were being alleged, because the author misidentified one basic piece of information. Cohan refers to the trades happening near the close for electronically traded e-mini futures contracts, which is 5 p.m. ET. But based on my review of the data, the volume surges actually took place near the closing time for a totally different market, the cash equity market, which is 4 p.m.

In the Vanity Fair piece, Cohan makes claims about the volumes in futures markets indicating specific directional bets on price — that is, large bets that the market will go up or down. For instance, on September 13, he claims that "he or she, or a group of people, sold short 120,000 'S&P e-minis' ... when the index was trading around 3010." The time window for this trade was said to be 3:50 p.m.

But a review of the data for that period shows no single transaction for more than 10,000 contracts after the 11 a.m. hour that day. No large off-exchange transactions ("block" trades reported to the exchange on a delay) were reported either.

In fact, the data shows only 138,760 contracts traded in total during the 10-minute window between 3:50 and 4.

Put another way, instead of one big trade happening at that time by one trader, the total number of contracts exchanged by all traders across the entire market equaled the Cohan's "suspicious trade."

Leaving aside the fact that it's totally ludicrous to assign almost all the volume in a 10-minute period to one group of people with inside information, just because trades took place as confirmed volume doesn't mean we can tell if they were new or old positions, buyers looking to get long, or sellers looking to get short. In fact, they were almost certainly a wide range of those sorts of positions, spread across the extremely diverse group of traders and institutions that operate in futures markets.

Cohan cites September 3 as an example of a big buy going through near the end of the day, which later turned profitable for the buyer thanks to Trump headlines.

Since all trades must by definition have a buyer and seller, the claim is in part tautological, but if a buyer is suddenly making huge, suspicious trades, you'd expect the overall market price to rise on volume, while a seller would do the reverse.

The problem is, as shown in the chart below, the rise in volume toward the close led to falling, not rising, prices, suggesting sellers were the ones moving volumes, not buyers. While prices did tick up fractionally during an explosion of volume right at the 4 o'clock close for cash equity markets, the move would have to have been far larger if those flows were not very well balanced between traders trying to buy and traders trying to sell.

Screen Shot 2019 10 18 at 12.04.06 PM

There is nothing unusual about big volumes late in the day, regardless of what comes next.

In the chart below, we show the volume for futures contracts traded between 3:50 and 4:05, a period when Cohan alleges the fishy trades happened on September 13, as a share of total futures contracts traded that day. As shown, the volume at that part of the day wasn't unusual. Futures (and other markets) very often see big volumes into the close, especially if it's already been a high-volume day.

Screen Shot 2019 10 18 at 1.25.15 PM

The Vanity Fair piece also cites June 28 for big, end-of-day volumes followed by a news event as evidence of malfeasance.

A trade that accounted for "some 40% of the day's trading volume in September e-minis" is specifically called out but there was no single trade for 420,000 contracts in that period that the author claims.

Instead, we see volumes of about 334,000 contracts in the September e-mini in the half hour between 3:30 and 4. That surge in volume, while large, is normal for the last trading day of a quarter.

Thanks to regulatory requirements and reporting period cutoffs, the last day of trading for the quarter (ending March, June, September, and December) is always going to be strange.

Exposures get moved around quickly, liquidity can disappear, and lots of business needs to get done. As a result, it's not unusual to see millions of contracts traded in the e-mini contract nearest to maturity.

It's also typical for many of these trades to get done at the very end of the day. In both March and June of last year, about 14% of quarter-end volume took place in the last half hour before the cash equity market closed. That's drastically less than the 40% claimed by Cohan, and even so September's month end saw 24% of e-mini volume in the last half hour, much more "unusual" than June.

All the claims made in Cohan's reporting sound damning. But given the proper context, numbers that are eyebrow-raising presented in isolation are in fact business as usual in busy futures markets constantly buffeted by new information and trading strategies.

Playing to people's assumptions

The financial world is sometimes simple, but when generalists without subject-matter expertise dive into it, they can get over their skis quickly. The viral Vanity Fair piece is a clear example of that.

Sensationalizing and veiled suggestions of wrongdoing that appeal to what readers want to hear is a great way to grab eyeballs, but it's a horrible way to explain how the financial world works.

Even people who know better sometimes get caught up in the excitement. MSNBC host Stephanie Ruhle used to be a credit-derivatives saleswoman at multiple Wall Street firms, and that market sometimes uses the types of futures Cohan cites as a way to hedge exposure. Based on Ruhle's experience it would seem like she should know better, but the claims made in Cohan's piece were so dramatic that she tweeted out the piece.

All the claims made in the Vanity Fair article are easily debunked with a little bit of knowledge about how futures markets work and access to basic financial-markets software.

Ironically, that sort of easily debunkable claim that makes an emotional appeal to those hearing it is a trademark of the president's communication style, not a well-reasoned and grounded-in-reality view of the world that would come from an informed commentator.

Wrongdoing by the Trump administration and its hangers-on has resulted in jail terms and an impeachment inquiry by the House. Sensationalized and uninformed commentary doesn't help matters and in fact makes everything worse, contributing to the system of baseless ranting and invented reality that so many who oppose the president seem to abhor.

Special thanks to Kid Dynamite.

George Pearkes is the global macro strategist for Bespoke Investment Group. He covers markets and economies around the world and across assets, relying on economic data and models, policy analysis, and behavioral factors to guide asset allocation, idea generation, and analytical background for individual investors and large institutions.

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7. Apple surpasses Microsoft as the world's most valuable company (AAPL, MSFT)Пт., 18 окт.[−]

Tim Cook

  • Apple passed Microsoft on a market-capitalization basis on Friday to take back the crown as the world's most valuable company.
  • The iPhone maker was valued at roughly $1.065 trillion as of 11:20 a.m. ET, edging past Microsoft's $1.063 trillion valuation.
  • Apple's stock has surged in recent weeks as numerous analysts anticipate that iPhone 11 sales will surpass initial estimates.
  • Meanwhile, Microsoft was among those hardest hit by a broad tech-sector sell-off.
  • Watch Apple trade live here.

Apple surpassed Microsoft in market capitalization on Friday morning to retake the throne as the world's most valuable company.

The iPhone maker was valued at about $1.065 trillion as of 11:20 a.m. ET, edging past Microsoft's $1.063 trillion market cap.

Microsoft has held the market-value crown since April 25, when it beat estimates for quarterly earnings and breached the $1 trillion threshold for the first time.

Apple's stock has surged in recent weeks as numerous analysts have predicted better-than-expected iPhone 11 sales. Many firms had anticipated that people would skip out on Apple's latest phone lineup to wait for iPhones released in 2020, rumored to have 5G connectivity.

Further, Microsoft was caught in broad stock sell-off, falling as much as 2.2% on Friday. Apple was largely spared, declining by just 0.4% at its intraday low.

Read more: A self-taught hedge-fund manager who's returned 19%-plus annually to investors since 2012 shares the 3 books that 'put it all together' for him

Interbrand on Friday ranked Apple as the world's most valuable brand name, putting Microsoft in fourth place; Google and Amazon took second and third place. The brand-consultancy firm based its rankings on brand strength, value added to the company by the brand, and plans for the brand.

The report marked Apple's seventh consecutive year in Interbrand's top spot.

Apple became the first US company to break a $1 trillion valuation in August 2018.

Apple traded at $235.37 per share as of 11:55 a.m. ET, up roughly 50% year-to-date.

The tech giant has 25 "buy" ratings, 17 "hold" ratings, and six "sell" ratings from analysts, with a consensus price target of $225.01, according to Bloomberg data.

Now read more markets coverage from Markets Insider and Business Insider:

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8. Read Larry Ellison's email to employees honoring the memory of 'brilliant and beloved' Oracle CEO Mark HurdПт., 18 окт.[−]

Larry Ellison

  • Oracle co-founder Larry Ellison honored the memory of the late Oracle CEO Mark Hurd, whose death was announced Friday morning. Hurd was 62.
  • Ellison described Hurd as "a brilliant and beloved leader who personally touched the lives of so many of us."
  • In 2010, Ellison appointed Hurd co-president of Oracle, the company Ellison founded in 1977. When Ellison stepped down as CEO in 2014, he appointed Hurd and Safra Catz as CEOs of Oracle.
  • Hurd had stepped away from his role as CEO last month due to health concerns that were not specified.
  • Visit Business Insider's homepage for more stories.

Oracle co-founder Larry Ellison published a statement honoring the memory of Oracle CEO Mark Hurd, whose death was announced Friday morning. Hurd was 62.

The public statement was the same as the email he had sent to the troops Friday morning.

Ellison, who co-founded Oracle in 1977 and hired Hurd as co-president in 2010, wrote that Hurd was "a brilliant and beloved leader who personally touched the lives of so many of us during his decade at Oracle."

"All of us will miss Mark's keen mind and rare ability to analyze, simplify and solve problems quickly. Some of us will miss his friendship and mentorship. I will miss his kindness and sense of humor," Ellison wrote.

Ellison, who stepped down as CEO of Oracle in 2014, appointed Hurd and Safra Catz as Oracle's CEOs in September 2014. Ellison is currently executive chairman and CTO of Oracle.

Hurd had stepped away from his role as CEO last month due to health concerns that weren't specified. He died early Friday morning.

"Mark was my close and irreplaceable friend, and trusted colleague," Ellison wrote. "Many of us are inconsolable right now, but we are left with memories and a sense of gratitude…that we had the opportunity to get know Mark, the opportunity to work with him…and become his friend."

Oracle insiders say that the company held an all hands meeting on Friday morning but shared very little information about Hurd's illness, or the company's direction, that wasn't already known. Oracle did not announce any new organizational changes, for instance, since Hurd had already stepped away.

The company did not disclose, for instance, the nature of Hurd's illness. Employees had noticed that he began looking increasingly ill over for many months. He also began uncharacteristically canceling travel and speaking engagements in 2019.

Read Ellison's full statement here.

Are you an Oracle insider with insight to share? Contact Julie Bort on Signal at (970) 430-6112 using a non-work phone, or email at jbort@businessinsider.com. Open DMs on Twitter @Julie188. You can also contact Business Insider securely via SecureDrop.

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9. Elon Musk's SpaceX has a plan to deploy up to 30,000 new satellites — and Morgan Stanley says it could cost as much as $60 billionПт., 18 окт.[−]

elon musk spacex presentation talk starship mark mk 1 mk1 boca chica south texas september 28 2019 loren elliott GettyImages 1171856896

  • Elon Musk's SpaceX reportedly has plans to launch 30,000 more Starlink internet satellites — and Morgan Stanley says the initiative could cost as much as $60 billion.
  • The bank's analysis assumes a cost of $1 million to build each satellite and about $50 million for every 60 satellites launched.
  • Morgan Stanley also estimates the cost to replacement the satellites, which happens about every five years, would equate to around $12 billion in annual capital expenditures.
  • Visit the Business Insider homepage for more stories.

Elon Musk's SpaceX has reportedly asked the International Telecommunication Union if it can launch an additional 30,000 Starlink internet satellites — and Morgan Stanley says the plan could cost as much as $60 billion.

The firm's analysis assumes each satellite will cost about $1 million to build and about $50 million to launch every 60.

"SpaceX is accelerating plans to deploy and commercialize satellite broadband with significant implications for capital demands, valuation ... and potential strategic implications for Tesla," Morgan Stanley wrote in a note to clients on Friday.

The bank continued: "We believe near-term timeline for Starlink will impact investor sentiment across the broader space economy."

Morgan Stanley also estimates the cost to replace the satellites every five years will be around $12 billion in annual capital expenditures.

SpaceX's new proposal would bring the total plan for Starlink to 42,000 satellites. That's about 20 times the number of operational satellites today and almost five times the total of all spacecrafts launched since 1957, according to an analysis by Business Insider.

Read more: Legendary investor Peter Borish describes how effective investing is like being a successful baseball manager — and shares his top trade for an economy wracked with record debt

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10. One Wall Street firm just slashed Beyond Meat's price target by nearly 25% (BYND)Пт., 18 окт.[−]

The Beyond Meat IPO at the Nasdaq Marketsite.

  • Bernstein lowered its Beyond Meat price target to $130 from $172 in a Friday note. Shares slid as much as 6.8% on the news.
  • The lower target stems from Bernstein's reduction of the company's enterprise-value-to-sales multiple to 15 times from 20 times.
  • Bernstein still expects that Beyond Meat will post solid full-year sales, but says investors will need an update on the competitive landscape from the plant-meat company.
  • Watch Beyond Meat trade live on Markets Insider.

One Wall Street firm just slashed its price target on Beyond Meat.

Bernstein lowered its price target on shares of the plant-based meat alternative company to $130 from $172 in a Friday note and reaffirmed its "neutral" rating on shares. That's a cut of nearly 25%.

The reflects a valuation of 15 times enterprise-value-to-sales as opposed to 20 times, which Bernstein previously used. Shares slid as much as 6.8% on the news.

The lower multiple is a result of Bernstein's expectations for sales growth that's stronger than previously expected. The firm thinks current revenue forecasts are failing to fully factor in retail partnerships with companies like Dunkin Donuts, McDonalds, and HelloFresh. Bernstein estimates that full-year 2019 sales will exceed management's guidance of above $240 million and consensus forecasts of $261 million.

In order to get its forward multiple — and its enterprise value forecast — back in line, the firm lowered its price target.

The lowered price target comes just before Beyond Meat announces third-quarter earnings, due October 28. In addition to seeing solid quarterly sales numbers, "investors will want to hear an update on the competitive landscape, especially after Impossible Foods launched in retail," Howard wrote.

Read more: Legendary investor Peter Borish describes how effective investing is like being a successful baseball manager — and shares his top trade for an economy wracked with record debt

Since Beyond Meat's May initial public offering, Impossible Foods, a main competitor, launched in grocery stores in September. Like Beyond Meat, Impossible Foods also has a number of high-profile food partnerships with restaurants, such as Burger King.

And, a number of traditional packaged food companies have gotten in the plant-based meat game. Tyson Foods, which was an early investor in Beyond Meat, has launched competing plant-meat brands, as have Hormel, Kellogg, and Nestle.

The entry of larger brands "could present a risk, especially if their deeper pockets allow them to outspend Beyond Meat and enable them to develop better products or to market and distribute them," wrote Howard.

There are other risks to Bernstein's valuation, including the potential for low repeat purchase rates of Beyond Meat, problems with key ingredients, and its struggle to expand capacity to keep pace with skyrocketing demand.

In addition, "Beyond Meat's path to profitability remains uncertain," according to the note. If the company does not improve its profitability in the next three to five years, Howard wrote that it would pose a risk to Bernstein's estimates.

Beyond Meat is up 344% year to date.

bynd

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11. Nearly one-third of all Amtrak trains are late — and it could be costing the railroad $42 million every yearПт., 18 окт.[−]

Amtrak Penn Station Waiting Room passengers

  • Amtrak's inspector general estimates that the railroad could save more than $40 million annually by increasing on-time performance.
  • Many of those rampant delays, however, are caused by the freight railroads responsible for most of Amtrak's service.
  • Still, Amtrak expects to be profitable by 2021, its CEO has said. There's plenty of work to be done.
  • Visit Business Insider's homepage for more stories.

Chronic Amtrak delays are hampering the railroad's efforts to break even by 2021, and are costing an estimated $41.9 million per year over the long term.

Of the 43 routes examned by the railroad's inspector general in a report published this week, 31 failed to meet Amtrak's on-time standards (70% for long-distance routes, and 80% for state-supported ones).

Even if Amtrak is able to increase timely trains by just five percentage points, the inspector general said, the immediate impacts could see $8.2 million in reduced costs and $3.9 million in increased revenues.

"We identified a range of other financial benefits that could accrue if the company was able to improve OTP to a minimum level of 75 percent on long distance trains and sustain those improvements for at least a year," the report said, using the OTP acronym to describe on-time performance.

Amtrak host railroad performanceA bulk of those delays — with which many Amtrak passengers are all too familiar — happen because the trains rely on "host railroads" to operate when Amtrak doesn't own the trackage outright. Only 3% of Amtrak's 21,400 route-miles are owned by Amtrak itself.

"Although federal law requires host railroads to give passenger trains preference over freight trains," the inspector general wrote, "company executives have stated publicly that host railroads routinely disregard these laws, resulting in delays."

Read more: It took me 96 hours to ride an Amtrak train from coast to coast. I'd do it again in a heartbeat.

Those host railroads scored an average of a C grade for 2018, Amtrak reported earlier this year, meaning "many passengers are very late."

Business Insider reached out to the six host railroads that support Amtrak service. Canadian National, which scored second to last in Amtrak's latest report card, with a D-, blamed the delays on speed restrictions that are currently in place on certain routes CN operates for Amtrak.

"Once an effective solution has been validated and implemented, the speed restrictions should be lifted," a representative said. "There are still a number of steps to take in the testing process, but CN is dedicated to work as fast as possible with Amtrak on a solution that allows Amtrak's trains to run safely without a speed restriction."

Union Pacific declined to comment.

On the road to profitability

The costs outlined by the inspector general are especially pertinent as Amtrak targets breaking even for the first time in its 48-year history by 2021.

It's "something people never thought could be done," CEO Richard Anderson said to a round of applause at an event in New York City in September.

But there's still plenty of work to do. In 2018, the railroad lost $817 million on total revenues of $3.39 billion. It's expected to report 2019 financials next month.

"The findings from these two important reports illustrate the real financial impacts of late trains," Dennis Newman, Amtrak's executive VP of strategy and planning, said. "Beyond that, they confirm late trains impact every aspect of our operations, from equipment usage and staffing, to trip-time competitiveness and reliability for our customers."

Do you work for Amtrak? Have a news tip? Get in touch with this reporter at grapier@businessinsider.com. Secure contact methods are available here.

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12. 'Like 4chan found a Bloomberg terminal': Here's how one Reddit user raked in a 14,000% return on two simple trades (ROKU, SPY)Пт., 18 окт.[−]

Reddit

  • A member of the Reddit page WallStreetBets grew $766 into $107,758 in two late-September trades, Bloomberg reported Thursday.
  • Eddie Choi first purchased put options for Roku stock, profiting $49,787 when the streaming provider's shares tanked more than 19% on September 20.
  • The trader then used his profits to buy put options for the SPDR S&P 500 ETF — or SPY — an exchange-traded fund that tracks the benchmark's performance. When its price tumbled on September 24, Choi's investment surged to $107,758.
  • Visit the Business Insider homepage for more stories.

Reddit has pages for nearly every interest, from oddly satisfying videos to Spongebob-themed meme pages.

One corner of the site — somewhat conservatively named WallStreetBets — hosts stock-market fanatics obsessed with rolling the dice on high-risk "YOLO" trades. Those who lose tens-of-thousands of dollars seem to brag just as boisterously as those who land massive gains, lending credence to the sub-Reddit's tagline: "Like 4chan found a Bloomberg terminal."

Eddie Choi is a lucky member of the latter group, turning $766 into $107,758 over the span of just two options trades, Bloomberg reported Thursday. The forum member said he learned how to trade options contracts on WallStreetBets, and became an overnight celebrity amongst its 600,000 members after posting his 13,967% gain.

"I'm naturally a risk-loving person. When I see these people making a lot and losing a lot of money, it caught my attention," Choi told Bloomberg.

For the first half of his two-trade achievement, the trader purchased short-term put options for Roku stock — assets that capitalize on volatility and hinge on the underlying stock falling below a certain level, before a specific date.

When shares of the streaming provider fell 19% on September 20, Choi's $766 worth of options was suddenly worth $50,553.

Read more: A self-taught hedge fund manager who's returned 19%-plus annually to investors since 2012 shares the 3 books that 'put it all together' for him

But the trader didn't stop there. Choi then used his new capital to buy put options on the SPDR S&P 500 exchange-traded fund ( SPY), a popular gamble among WallStreetBets members. When the ETF fell more than 1% on September 24, his options set to expire the next day more than doubled to $107,758.

Choi's gains were fueled by the natural risk associated with options trading, and that the contracts he held were set to expire soon after he bought them.

For every get-rich-quick story on the forum, an unfortunate member posts a screenshot showing a hefty investment cratering overnight. Yet Choi's luck hasn't turned him away from the website or the risky trades.

"I don't really want to stop trading options and reading WallStreetBets because it's entertaining and funny," he said.

"But I didn't want to be infamous on the forum for losing all my gains."

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13. Photo of ex-Goldman CEO Lloyd Blankfein loving retirement shows how dramatically he's 'lost stature'Пт., 18 окт.[−]

Blankfein

Former Goldman Sachs CEO Lloyd Blankfein posed with Harvard's men's basketball team and comically took a jab at his height amongst the collegiate athletes.

"I knew I'd lose stature when I left my old job," he wrote in a tweet. "Thank you Harvard basketball team for rubbing it in!!"

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14. Nancy Pelosi's bill to lower prescription drug costs would save Medicare a whopping $345 billion over 7 years, CBO saysПт., 18 окт.[−]

House Speaker Nancy Pelosi

  • The Congressional Budget Office released a report last Friday saying that House Speaker Nancy Pelosi's bill to lower prescription drug costs would lead to massive savings for the federal government, though it could also stymie the development of new drugs if it becomes law.
  • The partial analysis from the agency said the bill would save Medicare $345 billion from 2023 to 2028, putting the entitlement program on track to reduce prescription drug spending by a quarter.
  • The analysis also laid out some of the bill's possible immediate and future impacts on the drug market, which include savings and better access to medical care, though reducing spending on research.
  • The budget analysts estimated that pharmaceutival revenues would drop between $500 billion to $1 trillion over a decade, leading eight to 15 fewer new drugs to enter the market in the same time span.
  • Spearheaded by Pelosi, House Democrats have steamed forward on the drug pricing legislation, which would empower Medicare to negotiate lower prices for up to 250 drugs every year.
  • Visit Business Insider's homepage for more stories.

The Congressional Budget Office released a report last Friday saying that House Speaker Nancy Pelosi's bill to lower prescription drug costs would lead to massive savings for the federal government — though it could also stymie the development of new drugs if it becomes law.

The partial analysis from the agency said the bill would save Medicare $345 billion from 2023 to 2028, putting the entitlement program on track to reduce prescription drug spending by a quarter.

Read more: One chart reveals how the cost of insulin has skyrocketed in the US, even though nothing about it has changed

The analysis also laid out some of the bill's possible immediate and future impacts on the drug market, which include savings and better access to medical care, though reducing spending on research.

"In the short term, lower prices would increase use of drugs and improve people's health," the report said. "In the longer term, CBO estimates that the reduction in manufacturers' revenues... would result in lower spending on research and development and thus reduce the introduction of new drugs."

The budget analysts estimated that pharmaceutival revenues would drop between $500 billion to $1 trillion over a decade, leading eight to 15 fewer new drugs to enter the market in the same time span. It estimated 300 more drugs be introduced in that period.

Read more: Medicare for most, If not all: We polled Americans to find out what a popular universal healthcare coverage plan in the US could look like

Another analysis on the same drug bill from the federal Centers for Medicare and Medicaid Services found it would save US households $158 billion over 10 years in the form of lower premiums and reduced out-of-pocket spending.

Spearheaded by Pelosi, House Democrats have steamed forward on the drug pricing legislation, which would empower Medicare to negotiate lower prices for up to 250 drugs every year. And then allow it to apply those discounts on private health plans across the nation.

It also includes penalties for manufacturers who refuse to negotiate or fail to reach an agreement with the federal government.

Read more: Pelosi moves on drug prices despite falling out with Trump

The bill passed a key House committee on Thursday evening, and its expected to move through several more on its way to a floor vote as soon as the end of this month.

Republicans are fiercely opposed to the bill, though both parties had agreed on the need to reduce skyrocketing drug prices this year, an issue that has a groundswell of support among voters. The GOP said the bill is dead on arrival in the Senate without substantial changes, particularly on allowing Medicare directly negotiate prices.

Before launching an impeachment inquiry against President Donald Trump last month, Pelosi said she still held out hope to work with the president on a law lowering prescription drug costs by the end of the year.

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15. The maker of Absolut vodka is getting whacked by China's crackdown on organized crimeПт., 18 окт.[−]

absolut vodka

  • Pernod Ricard, the maker of Absolut vodka and Malibu rum, is feeling the pain from China's anti-crime campaign.
  • The liquor giant's sales of Chivas Regal whisky fell last quarter as the Chinese government cracked down on money laundering, drug dealing, and prostitution by forcing nightclubs and karaoke bars or "KTVs" to close earlier.
  • The campaign is "leading in some cases to temporary closures of KTVs and as well some modern clubs have to close a bit earlier than they should, let's say," Pernod Ricard's head of finance, IT, and operations said.
  • Watch Pernod Ricard trade live on Markets Insider.

The maker of Absolut vodka and Malibu rum is feeling the pain from China's anti-crime campaign.

Pernod Ricard's sales of Chivas Regal whisky fell last quarter as the Chinese government cracked down on money laundering, drug dealing, and prostitution by forcing nightclubs and karaoke bars or "KTVs" to close earlier.

"Chivas is in decline due to the challenging on-trade environment," Helene de Tissot — the liquor giant's head of finance, IT, and operations — said on its first-quarter earnings call this week. China's policing efforts are "leading in some cases to temporary closures of KTVs and as well some modern clubs have to close a bit earlier than they should, let's say," she added.

"On trade" refers to sales to hotels, bars and restaurants. The tough backdrop limited Pernod Ricard's revenue growth in China to 6%, down from 27% in the same period of 2018, its earnings report showed. Overall revenue climbed 4%, reflecting higher sales in the US and India, offset by a 6% drop in global travel retail sales. Concerned investors sent Pernod Ricard's shares down 4% on the news.

Chinese authorities launched a three-year, nationwide campaign to tackle organized crime last year, targeting both gang members and corrupt officials. They've temporarily shut down an estimated 21,000 nightclubs and bars across the country, affecting 3 million employees, the Global Times reported in June. More than 79,000 suspects had been detained as of March, Xinhua reported.

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Screen Shot 2019 10 18 at 10.45.34 AM

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16. Can't afford a $1,780 share of Amazon? Charles Schwab will offer fractional share trading in an effort to attract younger investors (SCHW)Пт., 18 окт.[−]

FILE PHOTO: A man walks past a Charles Schwab investment branch in Chicago, Illinois, United States, May 11, 2016. REUTERS/Jim Young


Charles Schwab will soon offer fractional share trading in a bid to bring in younger clients, the Wall Street Journal reported Thursday.

The purchase and sale of fractions of shares is one of several new investment programs coming to the firm's platform, the firm's founder and chairman Charles Schwab told WSJ.

Fractional shares offer a new way to entice younger traders who can now avoid commission fees at a bevy of trading firms. Those without the capital for pricier stocks like Amazon or Berkshire Hathaway Class A — which closed Thursday at $313,200 per share — would be able to invest in the firms at a feasible buy-in.

The new program comes off the heels of the Schwab's elimination of commission fees. Schwab's decision prompted Interactive Brokers, TD Ameritrade, E*Trade, and Fidelity to cut their commission fees in the following weeks.

"I wanted to take commissions out of the formula. We've been on that path for 40 years," Schwab told WSJ.

Major brokers are pushing for new ways to drive revenue with commission-free trading quickly becoming the industry standard. Some new offerings include commission-free options trading, free financial advice, and high-yield interest accounts.

Read more: Charles Schwab on Charles Schwab: The founder explains why the firm just axed commissions as broker wars reach a fever pitch

Though Schwab is poised to be the first major firm to offer fractional share trading, a similar program has been around for years. The firm already sells partial shares to clients to allow them to access dividend reinvestment plans, or DRIPs.

The new fractional share system could allow for a greater variability of ownership options, though the program's parameters aren't yet clear.

Charles Schwab wasn't immediately available for comment.

Several smaller firms already offer fractional trading, including M1 Finance and SoFi. The latter launched after finding investors would purchase shares for their price and not for their belief in a company's financial success, according to SoFi.

Charles Schwab closed at $39.45 per share Thursday, down about 5% year-t0-date.

The firm has 11 "buy" ratings, eight "hold" ratings, and two "sell" ratings from analysts, with a consensus price target of $42.08, according to Bloomberg data.

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SCHW

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17. Microsoft's booming cloud business could send the stock soaring 15% over the next year, RBC says (MSFT)Пт., 18 окт.[−]

Satya Nadella

  • Microsoft's robust cloud business could propel its stock 15% higher over the next year, according to RBC Capital Markets.
  • Between Microsoft's enterprise Azure package and Office 365, the company's products are "serving mission-critical functions" for customers, RBC said.
  • The firm initiated coverage of the tech giant Friday with an "outperform" rating and $160 price target, which represents a 15% premium from it close Thursday.
  • Watch Microsoft trade live.

Microsoft's thriving cloud business could send its stock on a 15% rally over the next year, RBC Capital Markets said.

"With the unmatched depth and breadth of its technology portfolio, we believe the company has multiple levers to grow revenue, margins, and its customer base over the next several years," the firm's analyst wrote in a note to clients on Friday.

RBC initiated coverage of Microsoft on Friday with an "outperform rating" and $160 price target, which represents a 15% premium from where shares closed Thursday.

Microsoft's cloud business includes its enterprise Azure solutions for managing corporate systems and applications, as well as its Office 365 package featuring well-known programs like Microsoft Word and Excel. The company competes with Amazon's cloud offering Amazon Web Services in the enterprise space.

Between these two offerings, Microsoft is poised to become a strategic partner for companies transitioning over to the cloud, as its products continue to serve "mission-critical functions," RBC said.

"In a world increasingly moving to the cloud, but still encumbered by legacy investments that sit elsewhere and still drive value today, Microsoft is uniquely positioned to take an increasingly large percentage of corporate IT budgets in a hybrid world," the firm added.

Microsoft's commercial cloud business generated $38 billion of its $125 billion in revenue for fiscal 2019, CEO Satya Nadella said on the company's fourth-quarter earnings call. RBC expects Microsoft's Azure business to grow more than 55% in fiscal 2020.

Shares of Microsoft were up more than 37.5% through Thursday's close.

Read more: Legendary investor Peter Borish describes how effective investing is like being a successful baseball manager — and shares his top trade for an economy wracked with record debt

MSFT stock

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18. A Wall Street analyst has crowned Canadian cannabis company Cronos Group a 'new king in the north' and upgraded its shares to 'buy' (CRON)Пт., 18 окт.[−]

In this Wednesday, Oct. 9, 2019 photo, a customer sniffs a display sample of marijuana, in a tamper-proof container secured with a cable, sold at Evergreen Cannabis, a marijuana retail shop, in Vancouver, B.C. One year into Canada’s experiment in legal marijuana, hundreds of legal pot shops have sprung up. But many people still buy their weed on the sly, because taxes and other issues mean that craft marijuana costs nearly twice what it did before legalization. (AP Photo/Elaine Thompson)

  • Stifel's W. Andrew Carter upgraded shares of Cronos Group to "buy" from "hold" and lowered his price target to $14.00 from $16.50.
  • Shares gained as much as 2.83% in early trading Friday.
  • Cronos is well-positioned to become the industry leader in cannabis because it has a lot of cash on hand to invest and can leverage its partnership with tobacco company Altria, according to Stifel.
  • Watch Cronos trade live on Markets Insider.

Cronos Group is sitting at the top of the weed game, according to Stifel.

Stifel analyst Andrew Carter upgraded the company to "buy" from "hold" and lowered its price target to $14.00 from $16.50 in a note late Thursday. Shares gained as much as 2.83% on the news early Friday, extending gains from Thursday, when a series of purchases boosted shares overnight.

The upgrade comes amid what Carter described as a "sector meltdown" that began in July. Because of Cronos' underperformance during this time, when a slew of marijuana companies pared major losses, it's now trading at a discount versus its global competitors, Carter said.

"We believe renewed investor enthusiasm is inevitable as we consider the $200 billion global opportunity driven by regulatory and demographic tailwinds," Carter wrote.

Cronos is "unconstrained" in its ability to invest toward this as it has 2 billion Canadian dollars in cash on hand, which is 50% of its market capitalization, Carter said. It can also leverage the resources of tobacco giant Altria, which owns 45% of the cannabis company.

His price target of $14 assumes a seven times enterprise-value-to-sales multiple on Stifel's full-year 2021 sales estimate, with Cronos regaining a premium to its peers. Stifel estimates CA$450 million in sales in 2021, driven by Cronos taking a leading position in the vapor segment.

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While Carter wrote that he is anxious about the development of the Canadian cannabis market, which he called a "bureaucratic mess" that could keep the sector from growing, he acknowledged that there could be opportunities in sector fallout. In addition, Cronos' limited Canadian investment is now an advantage as opposed to a risk.

The company also offers "clear points of differentiation" from sector headwinds, Carter wrote, which suggests that its recent underperformance is a solid buying opportunity. Cronos has grown revenue, and Carter said it will likely use its partnership with Altria to build its US CBD business.

There is some risk to Stifel's outlook for Cronos in that the US vaping crisis has created uncertainty in Canada, Carter said. Delays in product shipments could hurt Cronos, but the issue is a "resolvable controversy" that could provide the company an opportunity to differentiate its growth profile, according to Carter.

Cronos is down nearly 20% year-to-date.

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19. Ray Dalio warns of a 'great sag' in the global business cycle, and central banks can't do much to stop itПт., 18 окт.[−]

ray dalio

  • Ray Dalio is warning that the world economy is in a "great sag" and central banks won't be able to fight it.
  • According to CNBC, Dalio said that with interest rates so low around the world, central banks can't lift the economy through monetary policy alone.
  • Instead the billionaire called upon a coordinated response from governments to lift the global economy.
  • View Markets Insider's homepage for more stories.

Hedge fund mogul Ray Dalio warned that the global economy is in a "great sag" and central banks won't be able to provide the stimulus to get out of it.

Speaking at a panel at the IMF and World Bank meeting in Washington, moderated by CNBC, the billionaire investor said the current business cycle is "the best we get, but it's not going to continue forever, you have this sag."

Because of this "sag," Dalio warned that monetary policy would not be so effective. "We have a situation where we don't have the ability to ease monetary policy," said Dalio, who added that "Europe is at the limitation of that [interest rate cuts], Japan is [too], and the US doesn't have much to go on for that."

Dalio said that as a result, fiscal policy and an appropriate government response should be utilized alongside central banks.

"Monetary policy it's not going to be so effective," he said, according to the video of the event. "Imagine if you have a downturn and you have not as effective monetary policy, then there has to be coordination. So how do you get coordination in this kind of political environment? Then you have to have coordination with fiscal and monetary policy to be able to do something and then you have to have political coordination between the various factors on what the policy should be."

The Bridgewater Associates founder also likened the current political and economic climate to the 1930s, touching on the idea that we have a rising power challenging an existing power in the form of the China and the United States.

"There's four kinds of war: there's a trade war, a technology war, currency capital war, and a geopolitical war — and that's a phenomenon happening at the same time, so internally we have a lot more conflicts," Dalio told the panel.

Join the conversation about this story »

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20. We asked every 2020 Democrat how they would approach a trade war that has shaken the global economy. Only a handful of them had a plan.Пт., 18 окт.[−]

2019 10 16T053434Z_5_LYNXMPEF9F0CJ_RTROPTP_4_USA ELECTION DEBATE TECH.JPG

  • Business Insider asked each Democratic presidential hopeful how they would approach the trade war with China, which has become one of the most important economic issues in the US.
  • But many of the campaigns demurred, underscoring the awkward spot President Donald Trump has put the party in.
  • Democrats have historically favored far tougher trade policies than Republicans, but Trump has reshaped that playbook.
  • Visit the Business Insider homepage for more stories.

President Donald Trump has repeatedly said the US could be mired in a bitter trade war with China until after the elections in November 2020. But even as tit-for-tat tariffs roil the American economy, plans to address the dispute remain elusive among other presidential candidates.

Democrats have historically favored far tougher trade policies than Republicans, arguing that they're necessary to protect American workers from the downsides of globalization. In 2018, Trump reshaped that playbook as he levied sweeping tariffs in a bid to address Chinese trade practices seen as unfair.

Business Insider asked each Democrat how they would approach what has become one of the most important economic issues in the country. But many of the campaigns demurred, underscoring the awkward spot Trump has put the party in.

See the full responses below, listed in alphabetical order by last name.

SEE ALSO: Farmers are skeptical of the partial trade pact Trump announced with China

Michael Bennet

The campaign did not respond to multiple requests for comment.



Joe Biden

The campaign did not respond to multiple requests for comment. At the third Democratic debate in Houston last month, Biden said imbalances should be addressed but did not specify how.



Cory Booker

The campaign did not respond to multiple requests for comment. At the third Democratic debate in Houston last month, Booker said the US should address the trade dispute alongside allies but did not specify how.



Steve Bullock

The campaign did not respond to multiple requests for comment.



Pete Buttigieg

The campaign declined to comment. At the third Democratic debate in Houston last month, Buttigieg said he would "include the tariffs as leverage" in trade negotiations.



Juli?n Castro

The campaign did not respond to multiple requests for comment.



John Delaney

On whether the tariffs Trump imposed on Chinese products should be rolled back:

"Delaney would remove certain of the Trump administration's tariffs on Chinese goods. Tariffs are one tool that can be used in trade disputes, but relying on them hurts the American economy while having limited success in achieving our true strategic trade goals."

On how the candidate would address issues that could put Americans at a disadvantage, such as intellectual-property theft:

"Addressing IP theft would be one of Delaney's top priorities in our relationship with China. Delaney would work with US allies to insist on stronger protections for intellectual property and for the opening of the Chinese market generally, and he would support legislation to hold US companies accountable when they knowingly put intellectual property that benefited from taxpayer-funded research into risky joint ventures as a means of getting their way into foreign markets. Additionally, rejoining the TPP is central to Delaney's trade platform and would give the US more economic leverage in Asia to set fair rules for trade and counter anti-competitive Chinese practices."

On whether the Hong Kong protests and the treatment of the Uighur population should be tied to the trade dispute with China:

"Delaney believes that responding to the treatment of the Uighur population should be included in US diplomatic discussions with the Chinese government and strongly supports the US advocating for human rights as part of diplomacy generally. He would work with the UN and the international community to condemn human rights violations and would urge the Chinese government to respect Hong Kong's autonomous rights as a special administrative region."

On whether Huawei is a national security threat and subject to sanctions:

"Delaney is concerned about potential security vulnerabilities stemming from Huawei's involvement in US and European telecommunications networks and believes it is appropriate to limit Huawei's role in implementing 5G. Huawei's recent offer to separate its technology is worthy of some degree of exploration."



Tulsi Gabbard

The campaign did not respond to multiple requests for comment.



Kamala Harris

The campaign did not respond to multiple requests for comment. At the third Democratic debate in Houston last month, Harris said China should be held accountable but did not specify how.



Amy Klobuchar

On whether the tariffs Trump imposed on Chinese products should be rolled back:

"Senator Klobuchar will review all international tariffs in place as of 2021. She believes that President Trump is creating chaos with his erratic approach, which has trapped us in an escalatory tariff war that is hurting our workers, our farmers, and our economy."

On how the candidate would address issues that could put Americans at a disadvantage, such as intellectual-property theft:

"She is open to targeted, well-considered trade actions against China that respond directly to China's long-standing and well-documented violations of international trading rules, but she does not believe in any way that the current situation should continue."

On whether the Hong Kong protests and the treatment of the Uighur population should be tied to the trade dispute with China:

The campaign did not answer.

On whether Huawei is a national security threat and subject to sanctions:

The campaign referred Business Insider to remarks on "Face the Nation" this summer. Here's the transcript:

"I don't think we should be doing business with them right now. And I agree with my colleagues, not just Senator Rubio, but also Senator Warner, Mark Warner, who is the ranking on the Intelligence Committee, that this is a major security risk for America. You know, you look at everything from China to Russia using cyber against us. It is the modern warfare. We certainly know that from our elections in 2016.

"They may not use tanks or missiles, but they can go after our electric grid. They can go after our security in a very different way. And so I don't know why he would just give that away right now. I would think that he would put firm, firm standards in place as part of any agreement with China, and that's not what we have. We just have another promise that they're going to buy American agriculture. OK, that's positive, but I wouldn't give it up in the short-term gain for the long term where we need to protect our security and our cybersecurity."



Beto O'Rourke

The campaign declined to comment.



Tim Ryan

The campaign did not respond to multiple requests for comment.



Bernie Sanders

On whether the tariffs Trump imposed on Chinese products should be rolled back:

"My administration will begin a full review of all of the tariffs Trump has imposed, including advice from experts about which tariffs are working and what policies will substantially reduce our record-breaking trade deficit in goods and bring back good-paying jobs in the US that have been outsourced overseas.

"Tariffs may be part of the answer, but the Trump administration lacks a serious strategy for reducing our trade deficit or bringing back US jobs that have been shipped to low-wage countries. Instead of conducting trade policy by tweet, we need a complete overhaul of our trade policies to increase American jobs, end the race to the bottom, raise wages and lift up living standards in this country and throughout the world."

On how the candidate would address issues that could put Americans at a disadvantage, such as intellectual-property theft:

"American concerns about China's technology practices and IP theft are shared in Europe and across the Asia-Pacific. We can place far more pressure on China to change its policies if we work together with the broader international community and the other developed economies.

"As president, Sen. Sanders would establish a coalition of allies and partners that is agile enough to respond to Beijing's troubling behavior in key areas — including disputes over trade and IP — while pursuing ways to cooperate with China to tackle pressing challenges, especially climate change. Ultimately, restoring our capacity to be a model for others and rebuilding our competitive edge — both of which are suffering under Trump — will enable us to better respond to a rising China."

On whether the Hong Kong protests and the treatment of the Uighur population should be tied to the trade dispute with China:

"Human rights and trade are very much connected. Labor protections are very weak in China, and the rights of workers are an essential component of human rights. Trade negotiations should, for example, target corporations that contribute surveillance technologies that enable China's authoritarian practices.

"China is engaged in a program of mass internment and cultural genocide against the Uighur people. It has also been steadily eroding liberal democracy in Hong Kong. A Sanders administration will work with allies to strengthen global human rights standards and make every effort to let Beijing know that its behavior is damaging its international standing and undermining relations with the United States.

"Unfortunately, the Trump administration has abandoned the United States' role in promoting human rights."

On whether Huawei is a national security threat and subject to sanctions:

"Senator Sanders is concerned that Huawei's 5G networks could be utilized by Chinese hackers and spies. The Sanders administration will undertake a full assessment of the intelligence concerning this issue.

"If Huawei networks pose a national-security threat to the United States and our allies, he will work with allies to impose restrictions and sanctions. What he won't do is beat his chest about the threat and then toss the issue aside in a trade negotiation. That's President Trump's approach. It does not take our national security seriously."



Joe Sestak

On whether the tariffs Trump imposed on Chinese products should be rolled back:

"Yes, I would remove them — and as quickly as possible. (See below for how to better address the issue.)"

On how the candidate would address issues that could put Americans at a disadvantage, such as intellectual-property theft:

"In addition to intellectual property theft, a range of other Chinese trade practices — from subsidizing entire industries to running state-owned enterprises — are unfair and unjust. We must take appropriate action to get China to follow the 'rules of the road,' starting with convening the world together to enforce proper conduct on these issues. We must take immediate action.

"The primary mechanism on trade must be the World Trade Organization, which we do need to fix, but which offers the means to leverage our power and the power of all of our allies and friends around the world. As it stands, China is treated like a developing economy — which grants them 'special and differential treatment' — but we need the countries in the WTO to realize that the market capitalism of most countries and the state capitalism of China are two very different systems.

"China's Communist Party controls its economy with an extremely heavy hand, using state-owned enterprises, along with companies heavily influenced or directed by the state, to dominate a range of industries. We will have to start by changing WTO rules, which were originally written mainly to prevent dumping.

"Simply put, the WTO was not set up to deal with a vast, mercantile state using opaque subsidies and state-owned firms so its companies can compete unfairly on the world stage, distorting global trade on a scale far bigger than anyone anticipated — particularly with China's GDP now at nearly 75% of the US GDP. The WTO needs to create a more realistic definition of what kind of state support counts as a subsidy, redefine what a public company/public body is (changing the erroneous WTO appellate body ruling in 2003), and broaden the scope of banned subsidies.

"We must also make it easier to gather information on the wrongdoing of China, and if China does not comply by providing information, that will factor into decisions that go against them. The opacity of China makes it far too difficult to judge wrongdoing in trade practices. The WTO must lower the burden of proof for complainants challenging China's unfair trade practices and expedite the process by which cases are decided (60 days should be the limit).

"In summary, the WTO needs to treat the Chinese government's role in Chinese businesses for what it is: a raft of subsidies keeping Chinese enterprises floating above everyone else's. And, finally, the WTO also needs to play a strong role in addressing the $300 billion theft of US intellectual property, sapping potential revenue from countless American firms.

"With the world agreeing to this and standing firm together against China, it will prove to be in China's interest to support a fair global trading system, or else it will face a decline in its economic prosperity. If we are unable to reach agreement among the 164 nations of the WTO on these issues, we will have to establish a plurilateral agreement among the world's largest economies within the WTO to force China's hand.

"Such an agreement within the WTO would permit the world's largest economies to enforce the WTO's rulings against China, but with an agreement that the same rulings would not be enforced against poorer developing nations. We must succeed in these efforts — the welfare of our entire economy is at stake — but we can only do so if we convene the world and stand with our allies and friends on behalf of a rules-based global order."

On whether the Hong Kong protests and the treatment of the Uighur population should be tied to the trade dispute with China:

"I am deeply concerned about the human rights situation in China, especially in Hong Kong, and among the minority Muslim Uighur population, and traditionally Buddhist Tibetans. As the leading country of the rules-based world order organized around liberal values, we must consistently speak out against oppression and injustice, whether in China or any other country.

"But our trade policy must by necessity be focused mainly on correcting a different set of injustices — intellectual property theft, illegal subsidies, dumping, etc. However, as we get China to follow the rules of the road on fair trade, we will increasingly use our leverage to improve the human rights situation. But, again, we alone will not be able to get the results we want.

"We need to utilize our allies and international institutions, because only international solidarity will be able to constrain China and their autocratic values."

On whether Huawei is a national security threat and subject to sanctions:

"Yes, it is a direct threat to national security and it should be subject to sanctions, but also much more. We must convene the world to ensure that alternatives to Chinese technology exist, especially in information technology. Chinese corporations, led by Huawei, are now connecting at least two-thirds of the world's population to the transformational speed of the 5G network.

"China is making every country that signs up for its 'Belt and Road Initiative' agree to add China's 5G service as well. Even in countries that don't have Belt and Road agreements, China will still dominate 5G because Chinese companies make the wireless tower technology. This is arguably the greatest threat facing us from China. 5G will revolutionize economies — and warfare — particularly for those who build the network and therefore own it — and the United States does not even make the wireless equipment to do it.

"China's ownership of 5G will give it a police-state capability to surveil everything on the network, both for commercial and intelligence purposes: whether it is to observe virtual business meetings or to close down critical infrastructure — from our electrical grid to nuclear power plants — during international tensions.

"And to ensure it has 'eyes' on everything, data not passed through wireless systems will pass into China's hands via the undersea fiber-optic cables it is laying, which connecting the world's continents and carry more than 95% of all international communications traffic. Between the undersea cables and 5G, China will see and hear everything.

"Only by convening the world can we prevent Huawei and other companies — and therefore the Chinese government — from owning all of the information that passes through their 5G system. That will mean serious public-private investment, but it will be well worth it.

"To make matters worse, our corporations have outsourced our national security by allowing China to create a virtual monopoly in manufacturing the supply chains that make so many corporations' high-tech products, well beyond 5G towers. China makes 90% of personal computers sold in the United States, and 75% of mobile phones.

"Chinese-made motherboards are used in data servers worldwide, and according to landmark reporting from Bloomberg News last year, they are already sneaking in tiny microchips that can be used for spying. From Apple and Amazon to the Defense Department and the CIA, our entire business and national security establishment is in danger.

"This means that private data of Americans — and of the American government — can be surreptitiously sent to China, as software installed on some Android phones already makes possible today.

"Outsourcing jobs and industries to China has been bad enough, but outsourcing our national security is beyond the pale."



Tom Steyer

On whether the tariffs Trump imposed on Chinese products should be rolled back:

"Donald Trump is fraud and failure. His trade war with China is costing the average American family more than $2,000 a year and stifling American innovation and competitiveness at a loss of 300,000 jobs, according to Moody's.

"Tom would rollback back all the tariffs imposed on China as quickly as possible. Despite Trump's promise to bring manufacturing back, his actions have hurt that industry particularly hard. Trade policy success requires able and dependable leadership and strategies that aggressively promote, and protect American economic and national security interests."

On how the candidate would address issues that could put Americans at a disadvantage, such as intellectual-property theft:

"We are going to have to engage with China both economically and politically. It's ignorant to think that we can completely divorce these relationships. The real challenge facing our country is how we promote and protect American economic and national security interests.

"Tom believes that we should stand up strongly to China to protect the interests of American intellectual property and punish those that don't obey international laws. We are also going to have to protect American consumers and workers, ensure our cybersecurity, and work with China to address pressing global issues like the climate crisis and regional security."

On whether the Hong Kong protests and the treatment of the Uighur population should be tied to the trade dispute with China:

"We are going to have to leverage our economic, political, and diplomatic strength to China to respect human rights within their country and their neighbors. The devil is in the details of how we compete with China, and when we engage with them as a strategic partner."

On whether Huawei is a national security threat and subject to sanctions:

The campaign did not answer.



Elizabeth Warren

The campaign declined to comment. Warren called tariffs an "important tool" in her trade plan.



Marianne Williamson

1. Would any tariffs Trump has levied on Chinese products be removed? How soon? If not, would they be counteracted somehow?

"Americans have been too weak in dealing with China. China is playing a long game, aiming to dominate markets worldwide. China steals technology from the West by copying it and reverse-engineering it, or requiring coercive 'partnerships' with Western companies that want to do business in China.

"Typically, an American company is attracted by subsidies to build plants and take advantage of cheap labor. But the company must agree to produce only for export back to the West (not sell in China where it would compete with Chinese companies), and to share its advanced technologies with a Chinese partner whose goal is to displace the Western rival over time.

"The American response to Chinese strong-arm tactics has been timid and pro-corporate at the expense of American workers.

"Although I sometimes appreciate Trump's tough stand with China, his clumsiness and impulsivity has created a chaotic situation. His unpredictability has roiled stock markets. The tariffs levied on Chinese products has cost American consumers, with the average American estimated to pay an additional $800 this year according to economist Paul Krugman. Moreover, Trump has alienated US allies such as Canada and Europe, so he is on his own dealing with the Chinese, thus weakening his hand in negotiations."

2. If so, would the candidate still attempt to address issues such as IP theft? And what other tools could be used as leverage in negotiations? What could be used as an enforcement mechanism?

"As president I would negotiate with the Chinese to remove the tariffs, in exchange for concessions from them. Concession could include such things as allowing US businesses to operate in China without sharing their technologies with the Chinese, and other steps to stop intellectual property theft and commercial espionage.

"In these and any trade negations, protecting the rights or workers and the environment need to take a central role. I like the concept of an international carbon tax on all imports, for example, if China sends us goods produced with coal and other dirty technology, those goods would face a tariff.

"Similarly, China needs to move into the modern community of nations and recognize the rights of workers to organize and bargain in their own interests; that means unions function independently of the Communist Party.

"These demands could be enforced by the US protecting more of its national security, business and technology interests in relation to China. Moreover, I would assemble a coordinated Western response to China's tactics, so we would not be dealing with them alone and have more power in negotiations.

"We have laws to protect US military secrets. But the boundary between military and business technology is no longer clear. We need stronger laws protecting US business technology as a matter of national security."

3. Should China's handling of the Hong Kong protests be tied to the trade dispute? What about human rights issues such as the treatment of the Uighur population?

"The UN Declaration of Human Rights declares the rights which should be protected for all people. Violations of these rights such as the violent treatment of protesters in Hong Kong and the treatment of the Uighur population should be called out, and considered in all aspects of international relations including trade.

"The treatment of the Uighur people is particularly egregious. China has imprisoned more than a million Uighur in the Xinjiang region. Some observers say internment camps there are an effort to wipe out Uighur identity.

"I support putting companies that build the Uighur detention camps and their surveillance system on the Commerce Departments' Entity List. The Entity List is comprised of certain foreign entities — including businesses, research institutions, government and private organizations, and individuals — that are subject to specific license requirements for the export, reexport and/or transfer of specified items.

"Furthermore, I would use the Global Magnitsky Act to sanction the people running the camps and against Chinese officials overseeing the Xinjiang policy. Enacted in 2016, the Global Magnitsky Act allows the executive branch to impose visa bans and targeted sanctions on individuals anywhere in the world responsible for committing human rights violations or acts of significant corruption.

"As Human Rights Watch says, 'Sanctions deny individuals entry into the US, allow the seizure of any of their property held in the country, and effectively prevent them from entering into transactions with large numbers of banks and companies. Both American firms and international firms with American subsidiaries run the risk of violating US sanctions if they do business with sanctioned people.' I would apply these sanctions forcefully on the Chinese involved in trampling the human rights of the Uighur people."

4. Is a company like Huawei a national security threat? If so, should it be subject to sanctions?

"We need to understand that China seeks world domination not through armies, but through markets and communications. They have a government-controlled economy and people. They want the same in other countries. They don't just want to make money. They want to control other countries' markets and telecommunications.

"In China, everything is monitored. The Chinese government spies on everyone and everything. Any equipment from China could ultimately be used to spy on us.

"So yes, a company like Huawei is definitely a serious national security risk. The giant telecommunications company and phone maker could use its extensive reach and power to spy on the US government, businesses, and people.

"The US was right to ban US companies from using the Huawei networking equipment in 2012. Trump was right to add Huawei to the US Department of Commerce's Bureau of Industry and Security Entity List in 2019.

"The US has the power to prevent China from buying strategically important companies, which we have done through the Committee on Foreign Investment in the US (CFIUS). We should ensure China does not get an unfair advantage by buying American advanced-technology companies, or placing state-controlled companies like Huawei or ZTE in the heart of US infrastructure."



Andrew Yang

The campaign did not respond to multiple requests for comment. At the third Democratic debate in Houston last month, Yang said he would not immediately remove tariffs.



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