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The Number of Millionaires Continues to Increase

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The Number of Millionaires Continues to Increase

Charlotte Wold | Updated March 29, 2017 — 2:27 PM EDT

The number of millionaires is growing rapidly and is concentrated largely in the U.S.. By comparison, overall the wealth growth since the millennium – $139 trillion – appears to have been slow since the Great Recession, according to a report released by the Credit Suisse Research Institute.

More Millionaires

The number of millionaires in the world has increased by 155%, while the number of ultra high net worth individuals (defined in the report as people with a net worth above US $50 million) increased by 216%. Of the latter, 51% reside in North America. According to a forecast included in the report, the U.S. will have the highest growth of millionaires in the world over the next five years.

How big? The number of U.S. households with a net worth of $1 million or more, not including primary residence (NIPR), increased by 400,000 to reach a record 10.8 million in 2016

In the U.S., there are 13.6 million people with $1 million or more in wealth, up 283,000 from last year. By the year 2021 the number of millionaires will reach 18 million – a 33% increase – significantly higher than any other country. Another report by Spectrem Group released in March, 2017, suggests that the number is even higher, the number of U.S. households with a net worth of $1 million or more (not including primary residence (NIPR)) increased by 400,000 in 2016.

Credit Suisse also suggests that inequality in the U.S. is on the rise. Although the average wealth is $345,000, the median wealth is only $30,000, a significant drop from last year and three times as low as countries with similar average wealth.

Global Wealth

In the UK, 406,000 people now find themselves outside the millionaire’s club, after US $1.5 trillion was wiped from the country’s household wealth. The decline is largely blamed on Brexit. Overall global wealth has grown 5.2% annually in terms of USD since the year 2000 – a modest growth, according to the report. In dollar terms wealth has grown by $139 trillion; by comparison, the estimated GDP of the entire world in 2015 is US $73.2 trillion.

Published at Wed, 29 Mar 2017 18:27:00 +0000

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SEC denies a second application to list bitcoin product

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 SEC denies a second application to list bitcoin product

By Trevor Hunnicutt| NEW YORK

The U.S. Securities and Exchange Commission on Tuesday denied for the second time this month a request to bring to market a first-of-its-kind product tracking bitcoin, the digital currency.

The SEC announced in a filing its decision denying Intercontinental Exchange Inc’s NYSE Arca exchange the ability to list and trade the SolidX Bitcoin Trust, an exchange-traded product (ETP) that would trade like a stock and track the digital asset’s price. Previously, the regulatory agency said it had concerns with a similar proposal by investors Cameron Winklevoss and Tyler Winklevoss.

“The Commission believes that the significant markets for bitcoin are unregulated,” the SEC said in its filing, echoing language from its decision earlier this month on the application by CBOE Holdings Inc’s Bats exchange to list The Bitcoin ETF proposed by the Winklevoss brothers. On Friday, Bats asked the SEC to review its decision not to allow that fund to trade.

“We are reviewing the SEC’s order and evaluating our next steps,” said Daniel H. Gallancy, chief executive officer of SolidX Partners Inc, a U.S. technology company that provides blockchain services. NYSE did not immediately respond to a request for comment.

Bitcoin had scaled to a record of more than $1,300 this month, higher than the price of an ounce of gold, as investors speculated that an ETF holding the digital currency could woo more people into buying the asset.

But after denial of the Winklevoss-proposed ETF, the digital currency’s price plunged as much as 18 percent. It has rebounded partially since then and was at $1,041 on Tuesday, roughly unchanged from the previous day.

Bitcoin is a virtual currency that can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government.

Yet bitcoin presents a new set of risks to investors given its limited adoption, a number of massive cybersecurity breaches affecting bitcoin owners and the lack of consistent treatment of the assets by governments.

There is one remaining bitcoin ETP proposal awaiting a verdict from the SEC. Grayscale Investments LLC’s Bitcoin Investment Trust, backed by early bitcoin advocate Barry Silbert and his Digital Currency Group, filed an application last year.

(Reporting by Trevor Hunnicutt; Additional reporting by Gertrude Chavez-Dreyfuss; Editing by David Gregorio and Cynthia Osterman)
Published at Tue, 28 Mar 2017 19:07:02 +0000

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Morgan Stanley Back to November Breakout Level

 

Morgan Stanley Back to November Breakout Level

By Alan Farley | March 28, 2017 — 3:31 PM EDT

Old school investment house Morgan Stanley (MS) stood at ground zero during the 2008 economic collapse but lived to tell the tale, grinding out a less vigorous recovery than rival Goldman Sachs Group, Inc. (GS). To illustrate, it’s trading at an 8-year high after breaking out with the financial sector following the November election but needs another 30-points to reach the 2007 high. Contrast this performance deficit with Goldman, which recently rallied to an all-time high.

Recent sector weakness is starting to take its toll, dropping the stock down to November support in a selling wave could signal the start of an intermediate correction. And there’s no guarantee that dip buyers will come to the rescue in coming months because Congressional tax reform legislation will trigger much lower stock prices if their efforts fail to translate into statute.

MS Long-Term Chart (1993-2017)

MS

The stock came public at $6.64 (post three splits) in February 1993 and eased into a trading range, with support at $6.50 and resistance at $9.50. It held those narrow boundaries into a 1995 breakout that gathered momentum into the July 1998 high at $40.47. The near collapse of Long-Term Capital Management due to the Asian Contagion undermined financial sector sentiment at that time, triggering a steep decline that cut the stock price in half into October.

It returned to the prior high in 1999 and broke out, taking off in a vertical advance that reached an all-time high at $91.31 in September 2000. It lost ground through the rest of the Dot.com bear market, bottoming out in the upper-20s in October 2002 and turning higher in a recovery wave that failed at the .786 Fibonacci selloff retracement level in July 2007. A historic decline then followed, dropping the stock more than 60-points to a 14-year low at $10.15 in October 2008.

A bounce into 2009 stalled in the mid-30s, yielding a 2-year downtrend that posted a higher low in August 2012. Committed buyers then stepped in, lifting price in a steady uptrend that stalled at a 6-year high in the low-40s at the end of 2014. An August 2015 test at that level attracted aggressive sellers, triggering a decline that reached a two-year low in early 2016, while the subsequent recovery wave posted a fresh 8-year high in February 2017.

The monthly Stochastics oscillator has eased into a precarious position, lifting into the overbought level in October 2016 and crossing into a bearish cycle that will yield a long-term sell signal when it crosses back through the black line. The stock is already testing new support at $40, generated by the November rally, and could fail the breakout in conjunction with a bearish crossover. In turn, that has the power to dump price into deep support at the 200-month EMA at 31.

MS Short-Term Chart (2015–2017)

MS

The 2015 decline unfolded in two major selling waves that reached the low-20s in February 2016. A Fibonacci grid stretched across the rally waves into 2017 organizes price action, with a rate of change escalating rapidly after the stock lifted above the 50% retracement level. It posted just a single consolidation pattern between the low-30s and upper-40s, raising odds for a steeper slide if it fails to hold support at the 2015 high (blue line).

On Balance Volume (OBV) topped out in June 2015 and entered a distribution wave that continued into the second quarter of 2016, long after the February reversal. Heavy accumulation from that time into the first quarter of 2017 eliminated the deficit, lifting the indicator to a new high while signaling a bullish convergence that confirms the November breakout. This volume support should limit the downside during a correction.

The Bottom Line

Morgan Stanley turned lower after posting an 8-year high on March 1, losing ground for nearly four weeks in a selling wave that could signal the start of an intermediate correction. The November breakout is at immediate risk because the rally cleared that level by just 7-points while the recent decline has given up an equal number, bringing new support into play.
Published at Tue, 28 Mar 2017 19:31:00 +0000

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BlackRock cuts fees and jobs; stockpicking goes high-tech

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 BlackRock cuts fees and jobs; stockpicking goes high-tech

By Trevor Hunnicutt| NEW YORK

BlackRock Inc on Tuesday said it would overhaul its actively managed equities business, cutting jobs, dropping fees and relying more on computers to pick stocks in a move that highlights how difficult it has become for humans to beat the market.

The world’s biggest money manager has faced active stock fund withdrawals and the revamp is its biggest attempt yet to engineer a turnaround.

Last May, BlackRock said it had recruited Mark Wiseman, the head of Canada’s biggest public pension fund, to oversee the stockpicking operations after he revamped that fund’s operations to embrace data-mining and other technological approaches to investing.

BlackRock is rebranding or adjusting investment strategies on about 11 percent of its $275 billion active stock fund business, putting a greater emphasis on technology-driven investing approaches in the largest set of sweeping changes for the business since transformational mergers that allowed it to grow to manage more than $5 trillion in assets.

Among the changes, BlackRock is removing some seven traditionalist “Fundamental” portfolio managers from their current assignments, according to a source familiar with the matter. More than 40 employees are being laid off, including some of the portfolio managers, according to another source.

The company will also cut fees on some products that are being rebranded as an “Advantage” series of lower-cost active funds.

Planned fee cuts on that group of funds and its “Income” products will slice about $30 million of BlackRock’s revenue, and the company will take a $25 million charge this quarter to reflect severance and other compensation expenses.

The company said it will also expand its investments in data-mining techniques that it said can improve investment performance. Other funds are being refocused to take “high-conviction” bets on stocks.

Active stock managers in the United States have been smacked with withdrawals in recent years as investors increasingly fled to lower-cost products, including index-tracking exchange-traded funds, some of which charge as little as $3 annually for every $10,000 they manage, while the average charged by U.S. stock mutual fund managers is $131, according to data for 2015 from the Investment Company Institute trade group.

An industry bellwether, New York-based BlackRock also owns one of the most prized businesses in asset management, its iShares ETF franchise purchased from Barclays in 2009. Much of the company’s active stock franchise is from its 2006 acquisition of Merrill Lynch Investment Managers.

The changes mark the latest of several attempts by BlackRock to boost an active fund business that represents nearly a third of its assets but an outsized near-50 percent of its fees.

BlackRock CEO Larry Fink has sometimes expressed disappointment in the performance of the company’s actively managed stock funds, and he has pivoted increasingly to focusing on the company’s data-driven “Scientific” equity teams.

“It seems like the Vanguard approach to active equity management,” said Jason Kephart, senior analyst at Morningstar Inc, referring to the giant BlackRock rival that aggressively cuts fees and has also invested in tech-driven investment styles.

“The easiest way to make an active strategy more attractive is just to charge less for it.”

BlackRock’s equity overhaul also invites comparisons to that of another major asset firm rival, Pacific Investment Management Co. In 2015, Pimco’s equity chief left and the Newport Beach, Calif firm liquidated two of its equity strategies after spending years attempting to diversify its investor base to include those buying equity products.

BlackRock shares rose 1.50 percent to $380.63 per share on Tuesday before the announcement.

(Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and James Dalgleish)

 
Published at Wed, 29 Mar 2017 00:33:07 +0000

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Wells Fargo to pay $110 million to settle lawsuit over account abuses

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 Wells Fargo to pay $110 million to settle lawsuit over account abuses

Wells Fargo & Co (WFC.N) said it agreed to pay $110 million to settle a lawsuit by customers challenging its opening of accounts without their permission, a practice that led to a scandal that cost the bank’s chief executive his job.

The bank said on Tuesday it expects the settlement to resolve claims in 11 other pending class actions, and will cover claims between Jan. 1, 2009, through the date the agreement is executed.

The settlement agreement is yet to be approved by the court.

After attorneys’ fees and costs of administration, claimants will be reimbursed for any wrong fees, Wells Fargo said on Tuesday.

The remaining amount will be distributed to the claimants, based on the number and kinds of unauthorized accounts or services claimed, the bank said.

The lawsuit resolves claims that Wells Fargo’s high-pressure culture drove branch workers needing to meet sales quotas to open unauthorized accounts, including with forged signatures.

Customers said this saddled them with accounts they did not need or want, and fees they knew nothing about.

The lawsuit dates from May 2015, sixteen months before Wells Fargo agreed to pay $185 million in penalties to settle regulatory charges over the sham accounts, estimated to number as many as 2 million.

That settlement with the U.S. Consumer Financial Protection Bureau and Los Angeles City Attorney Mike Feuer prompted national outrage, leading to the departure in October of the bank’s longtime chief executive, John Stumpf.

The named plaintiffs in the lawsuit are Shahriar Jabbari, a Californian, and Kaylee Heffelfinger, from Arizona.

They believed they each had two accounts at Wells Fargo, but said the bank opened a respective nine and seven accounts for them, according to court papers.

Wells Fargo, which has abandoned sales quotas, had already set aside enough money to cover the $110 million settlement.

Its new chief executive, Tim Sloan, in January told analysts that the bank still has “a lot of work to do” to rebuild trust with customers, employees and other stakeholders.

“This agreement is another step in our journey to make things right with customers and rebuild trust,” Sloan said in a statement on Tuesday.

The case is Jabbari et al v. Wells Fargo & Co et al, U.S. District Court, Northern District of California, No. 15-02159.

(Reporting by Jonathan Stempel in New York and Nikhil Subba and Swetha Gopinath in Bengaluru; Editing by Shounak Dasgupta)

Published at Tue, 28 Mar 2017 21:38:51 +0000

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Companies to Gain from India’s Solar Boom

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SunPower Corp. (SPWR) Chief Executive Officer Tom Werner says the world’s largest democracy is set to become the world’s biggest market for solar energy.

Werner attributes his bullish outlook on the forthcoming Indian solar boom largely to Prime Minister Narendra Modi’s commitment to building out the sector. Modi’s administration has announced plans to spend $3.1 billion on state aid for solar panel manufacturing in efforts to increase India’s photovoltaic capacity and build out an export industry.

Goal: 40% of Power from Renewables

The Indian subcontinent, with a rising population of approximately 1.34 billion people, representing approximately 18% of the world’s total. In a country wherein 300 million individuals lack connection to an electrical grid, solar power represents a cost-effective means for Indians to produce their own electricity.

Along with Modi’s solar manufacturing initiative, named Prayas, the government has pledged to draw 40% of India’s total energy from renewables​ by 2030. In November, India built the world’s largest solar plant, capable of powering an estimated 150,000 homes.

Elon Musk, CEO of the merged entity formed by his two companies, SolarCity and Tesla Motors Corp. (TSLA), has also suggested an upcoming entrance into the Indian market. In February, Musk responded to a question on Twitter indicating he’s “hoping” Tesla will launch in India by this summer. (See also: SunPower CEO Skeptical About Tesla’s Solar Roof.)

The Bottom Line

Despite a short-term shock to the alternative energy industry in the U.S. due to heightened uncertainty after Donald Trump’s win and structural headwinds resulting from pricing changes and restructurings, speculation regarding the Indian market is just one example of solar energy’s long-term prospects around the globe. Worldwide, nations are choosing solar contracts over fossil fuels.

While major solar energy providers’ offerings become cost-competitive and nonreliant on changing government regulation, the global arena is simultaneously taking a more serious tack on climate change. (See also: 2017: A Turning Point for the Solar Industry.)
Published at Mon, 27 Mar 2017 02:34:00 +0000

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Micron Gets Six Price Target Hikes on Stellar Q2

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Micron Gets Six Price Target Hikes on Stellar Q2

By Shoshanna Delventhal | March 26, 2017 — 4:08 PM EDT

Shares of U.S.-based DRAM and NAND chip market leader Micron Technology Inc. (MU) hit a multiyear high on Friday, closing up 7.4% at a price of $28.43 per share.

As the Boise, Idaho-based semiconductor manufacturer’s stock reflects an approximate 174% increase year over year (YOY), a wave of analysts issued bullish notes on the chip maker, upgrading shares and lifting their price targets after fiscal Q2 earnings and guidance blew past expectations.

‘The Sun, the Moon and the Stars …’

Analyst Betsy Van Hees at Loop Capital, who maintains a buy rating and lifts her price target on MU from $30 to $25, indicates “the sun, the moon and the stars remain aligned for Micron as it benefits from the sweet spot of the memory cycle.” MKM Partners, Deutsche Bank, Credit Suisse, Nomura, Barclays, Pacific echoed this sentiment.

Barclays’ Blayne Curtis, with an overweight rating on Micron’s shares, lifted his price target from $26 to $35, noting “favorable supply/demand dynamics continue to support healthy pricing and the company improves cost.” Curtis also noted the magnitude of outperformance​ as attributable in part to Micron’s recent integration of Taiwanese Inotera Memories and new technologies ramp up. The analyst concluded, “we remain cognizant that the environment could eventually reverse.” (See also: Micron Closes $4.0 billion Inotera Deal.)

Joining the Bandwagon

MKM Partners, with a buy rating on Micron stock, increased its price target from $34 to $38, as Deutsche Bank, also with a buy rating, lifted its price target from $35 to $30.

John Pitzer of Credit Suisse, with an outperform rating on Micron’s shares and a new $40 price target says, “while MU is clearly benefiting from better cyclical pricing, the more important drivers seem more sustainable—mix, cost-downs and scale efficiencies.”

Nomura’s Romit Shah reiterated a buy rating on Micron and lifted his price target 33% to $40, applauding Micron’s record FQ3 annual earnings guidance of $6.

“Micron is benefiting to an almost comical degree from strong memory trends,” said Pacific Crest analyst Weston Twigg, with a sector weight rating on shares of the DRAM and NAND chip market leader. (See also: Micron Soars on Another Upbeat Earnings Report.)

 
Published at Sun, 26 Mar 2017 20:08:00 +0000

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After Trump rally, equity investors move into healthcare, retailers

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 After Trump rally, equity investors move into healthcare, retailers

By David Randall| NEW YORK

High U.S. share prices are pushing Lipper Award-winning equity fund managers into the shares of beaten-down healthcare companies, retailers and emerging-market stocks that they say offer a greater chance for outsized gains.

Fund managers from Poplar Forest, Parnassus Investments and Brandes Investment Partners are among the 2017 Lipper Award winners who are concerned about the high valuation of the benchmark S&P 500 index. With a forward price-to-earnings ratio above 18, the index is at the high end of its historical range.

Even after tumbling on Tuesday, the index is up more than 10 percent since Donald Trump’s unexpected U.S. presidential election victory on Nov. 8.

“It’s absolutely harder to find stocks at attractive valuations” now than it has been in the past few years, said Todd Ahlsten, lead portfolio manager of the Parnassus Core Equity fund.

As a result, Ahlsten said he has been adding to his positions in healthcare stocks such as Gilead Sciences Inc (GILD.O), Allergan PLC (AGN.N) and Novartis AG (NOVN.S).

Healthcare stocks had fallen in price on concerns over possible drug price controls ahead of the vote on the Republican bill to repeal and replace President Obama’s signature healthcare law. Shares of Gilead Sciences have slumped 5.5 percent since the start of the year; shares of Novartis are up 2 percent over the same time.

The vote, scheduled for Thursday, has now been postponed.

The S&P is up about 5 percent in the year to date.

“We feel like the rhetoric out there is creating opportunities,” Ahlsten said.

J. Dale Harvey, portfolio manager of the Poplar Forest Partners fund, said he has been trimming his energy and materials shares exposure and buying into brick and mortar retailers whose stocks have come under pressure as Amazon (AMZN.O) continues to expand.

“Mall-based businesses are facing declining traffic, but we’re trying to look for the proverbial baby thrown out with the bath water,” he said. “So far that has been early, but we have a habit of being early.”

He recently added a position in mall-based Signet Jewelers Ltd (SIG.N), which is looking to expand its number of freestanding stores. Shares of the company are down nearly 30 percent for the year to date and trade at a price-to-earnings ratio of 9.7.

“There’s a lot of negativity embedded in its valuation that we think is not warranted,” Harvey said.

Not every Lipper Award-winning fund is turned off by the high valuations, however.

Robert Marvin, portfolio manager of the Hood River Small-Cap Growth fund, said the recent stock market rally prompted him to buy recreational boat builder Brunswick Corporation (BC.N) and recreational boat and yacht dealer MarineMax Inc (HZO.N). Shares of both are up more than 10 percent in the year to date.

“We’re starting to see significant improvement in demand as middle- and upper-income consumers feel the wealth effect,” he said.

Kenneth Little, a co-portfolio manager of the Brandes Global Equity fund, said high valuations have left his fund “significantly underweight” the U.S.

Instead, his fund has been adding positions in emerging markets such as South Korea, Russia and Brazil, with large overweight in energy holdings and healthcare.

The fund is focusing mostly on large-cap companies such as Russian oil producer Lukoil, Brazilian aircraft maker Embraer SA, and South Korean auto parts maker Hyundai Mobis Co.

“The U.S., broadly speaking, looks pretty fully valued to us,” he said. By comparison, in emerging market stocks, “if you look through the short-term challenges, you have very good companies trading at very attractive prices,” he said.

Thomson Reuters Lipper is a division of Thomson Reuters Corp, the parent company of Reuters.

 

(Editing by Jennifer Ablan and Bernadette Baum)
Published at Fri, 24 Mar 2017 13:48:07 +0000

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If healthcare vote fails, would jeopardize ‘Trump trades’: Gundlach

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If healthcare vote fails, would jeopardize ‘Trump trades’: Gundlach

By Jennifer Ablan| NEW YORK

If the U.S. healthcare legislation overhaul is not passed, or is postponed, it will put “a lot of doubt” on the “Trump trades,” which include higher U.S. equities and bond yields, DoubleLine Capital Chief Executive Jeffrey Gundlach said on Wednesday.

“Surveys show that people believe the (Obamacare) repeal is the most likely part of Trump’s agenda to be passed,” Gundlach, who oversees more than $101 billion in assets at DoubleLine, told Reuters. “So if you can’t pass the repeal, everything else is in doubt for sure.”

Investors have been bracing for Thursday’s floor vote scheduled in the U.S. House of Representatives, with safe-haven securities including Treasuries and gold seeing price gains on Wednesday. Trump and Republican congressional leaders appeared on Wednesday to be losing the battle to get enough support to pass the Obamacare rollback bill.

Gundlach repeated his recommendation that investors would do better selling U.S. equities into any kind of stock rally and diversifying into emerging markets. He noted that the iShares MSCI Emerging Markets ETF (EEM.P) has outperformed the Standard & Poor’s Index by over 4 percentage points since early March.

Gundlach, who is known on Wall Street as the Bond King, said Tuesday’s stock-market slump illustrated how “investors are questioning whether the pro-growth U.S. policies are really going to happen.”

In early March, Gundlach said on his investor webcast that he expected a minor yield high on Treasuries, and then a rally. The benchmark 10-year U.S. Treasury note US10YT=RR currently trades around 2.40 percent, down from 2.60 percent in mid-March.

(Reporting by Jennifer Ablan; Editing by James Dalgleish
Published at Wed, 22 Mar 2017 20:33:44 +0000

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Hedge fund Millennium hires portfolio manager from Steve Cohen’s firm

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 Hedge fund Millennium hires portfolio manager from Steve Cohen’s firm

By Svea Herbst-Bayliss| BOSTON

Millennium Management, one of the industry’s biggest hedge funds, has hired a portfolio manager from billionaire stock picker Steven A. Cohen’s investment company, two sources familiar with the matter said.

Ariel Masafy specializes in consumer stocks and had worked for Cohen, who invests roughly $11 billion, since 2011. Masafy could not be reached for comment and a spokesman for Cohen’s firm, Point72 Asset Management, declined to comment.

Moves by portfolio managers between fund firms are closely watched on Wall Street especially now that many firms posted lackluster 2016 returns which could signal an uptick in moves.

Millennium, led by billionaire Israel Englander, employs a large number of trading teams that invest some $34 billion in assets. The firm’s flagship fund ended 2016 with a 3.3 percent gain, far below the double-digit gains it earned in past years.

In 2013 SAC plead guilty to insider trading charges and was forced by the government to stop managing outsiders’ capital. Cohen was never charged. A year later, the firm turned into a family office that invests Cohen personal fortune and changed its name to Point72. At that time, a number of Cohen’s fund managers left to set up their own firms.

(Reporting by Svea Herbst-Bayliss; Editing by David Gregorio)
Published at Tue, 21 Mar 2017 16:41:49 +0000

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Exclusive: Hedge fund Pine River loses more partners after asset decline – sources

 

Exclusive: Hedge fund Pine River loses more partners after asset decline – sources

By Svea Herbst-Bayliss and Maiya Keidan| BOSTON/LONDON

Hedge-fund firm Pine River Capital Management LP is losing two more partners following a difficult year that involved a restructuring and major decline in assets, people familiar with the matter told Reuters.

Franklin Parlamis, the firm’s most senior executive on the West Coast who had been with the firm for a decade, left Pine River in late-February, said two people familiar with the matter who were not permitted to discuss the private fund’s personnel movements publicly. He is now working on his own business, Aequim Alternative Investments.

Annette Krassner, who has been Pine River’s chief administrative officer since 2012 and oversees human resources, facilities, events, administrative staff and internal communications, will leave at the end of March, the people said.

Once Krassner leaves, Pine River will have 11 partners, compared with 16 partners in 2016. The firm does plan to name new partners in the coming weeks, one source said.

Pine River established itself as an industry powerhouse after its Pine River Fixed Income Fund earned a spectacular 93 percent gain in 2009.

Losses, outflows, and a key management change that helped spark the decision to shutter some funds have left Pine River with $9.8 billion in assets, down 35 percent from the $15 billion it managed in 2015.

Management, including founder Brian Taylor, spent much of last year overhauling the business and closing seven funds, including its prominent fixed-income fund. Pine River now manages four funds.

Parlamis ran the Pine River Convertibles Fund which had $250 million at its peak in 2015, but shrank to just $100 million at the end of last year, people familiar with its performance said.

Although the fund’s performance was strong, management decided to close the fund and return remaining investors’ money because it was too small to keep going profitably. The fund gained roughly 17 percent last year and had an annualized return of roughly 11 percent since its 2009 launch.

Parlamis’s departure was amicable, both sources said.

The strategy of investing in convertible securities will still be offered through the firm’s flagship Pine River Fund and separately managed accounts, where clients’ money is managed without mixing their investments with others.

Adam Stein, a New York-based portfolio manager who worked closely with Parlamis for years and relocated to the East Coast in 2016, will be in charge of those types of investments, which convert into other types of securities under certain circumstances.

Since Taylor launched the streamlining and restructuring effort last year, Pine River has closed seven portfolios that may have been too small and unable to generate much future interest from investors.

Among them were one of its best-known offerings, the Pine River Fixed Income fund, which posted huge returns early in its eight-year life before losing money in 2015 and in early 2016.

Steve Kuhn, who ran the Pine River Fixed Income fund, left in 2016 to focus on philanthropy. He was the firm’s most public face, representing Pine River at conferences and other events.

Pine River is now concentrating on its flagship fund, as well as the Pine River Liquid Rates fund, the Pine River Liquid Mortgage fund and the Pine River China fund, whose planned spin-off has been delayed.

Taylor wrote to investors about the restructuring last summer and then crisscrossed the world to explain his thinking regarding the changes.

He also laid out ways for long-term investors who made big financial commitments to pay less in fees.

The flagship Pine River Fund returned 8 percent over the last 12 months and was up 0.9 percent in 2016 after a 2.75 percent loss in 2015. Aaron Yeary, Colin Teichholtz and James Clark manage the multi-strategy fund. The Pine River Liquid Rates Master Fund earned 17.3 percent in 2016 and 13.5 percent in 2015.

Richard Knight, a partner who had been in charge of business development left last year as well. Brendan McAllister, a partner who co-managed the fixed income fund, also left recently to focus more attention on his family.

Michael O’Connell, who had run Pine River’s capital structure arbitrage strategy, left with his team to rival fund Paloma Partners late last year.

 

(Reporting by Svea Herbst-Bayliss in Boston and Maiya Keidan in London; Editing by Lauren Tara LaCapra and Bernard Orr)

(Why?)
Published at Thu, 16 Mar 2017 21:22:04 +0000

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Cooking up financial success with chef Marcus Samuelsson

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 Cooking up financial success with chef Marcus Samuelsson

By Cheryl Lu-Lien Tan| NEW YORK

As success stories go, chef Marcus Samuelsson’s is as geographically varied and fascinating as they come.

Born in Ethiopia and separated from his family a few years later during the Ethiopian civil war, Samuelsson was then adopted and raised by a Swedish couple, who taught him his earliest lessons about money and work ethic.

In the span of his career, the 46-year-old Samuelsson has won awards both for his cooking at New York City’s Aquavit and later his own restaurant, Red Rooster, as well as for his books. These range from a memoir to several cookbooks, including the 2016 “The Red Rooster Cookbook: The Story of Food and Hustle in Harlem.”

In May, the New York City-based Samuelsson will open a London outpost of Red Rooster. He talked to Reuters about his recipes for cooking up financial success.

Q: What were some of your first lessons about money?

A: My mom came from poverty and understood the value of money. She was very responsible and looked at her bank account every day to make sure it added up correctly. Even when her financial situation changed for the better, she was always very smart with her money.

Q: Who else taught you the value of money?

A: My uncles were fishermen. Where they stood with money could change swiftly because of the weather. If they went fishing on the roughest day, the price of the fish went up, and on good weather days, they might not go out because the prices would be so low. Even though they didn’t have a lot of money, they always ate well.

Q: What was your first job?

A: My first job was fishing, and it definitely shaped my work ethic. You wake up early and have to clean the boat and other equipment. You’d be out there all day sometimes battling a rough sea, and then you’d come back and collect your wages. There was also a social aspect of it that was fun. It definitely taught me the value of hard work.

Q: What drove you to open your own restaurant?

A: I was inspired by advice from my mom about cooking for people in the community where I lived. Up until that point, I had been cooking for the 1 percent. It just made sense to open a restaurant in Harlem – which was also where I made my home. I love that the clientele at Red Rooster are a mix of local Harlemites, the downtown crowd, and people from all over the world visiting. It’s very much in-and-of the Harlem community.

Q: What has running your own restaurant taught you about finances?

A: Humility. You can have a great day and then the next day will be the opposite because of the weather or something breaks in the kitchen. Being an entrepreneur is an endurance test that challenges you and your team.

Q: How do you give back?

A: Coming from a humble background, I wouldn’t be here without people being charitable, so I think about that all the time. I try to select charities across various matters including culinary education or clean water in Africa, or something else needing immediate action. In addition, I’ve also been involved with many organizations over the years and am currently a board co-chair at C-CAP (Careers through Culinary Arts Program), which prepares underserved youth for careers in the professional world of culinary and hospitality.

Q: What life lessons did you father teach you about money?

A: Growing up, my father made it clear that his money was his money and not mine. He was happy to help out, but never paid for everything. He taught us if we wanted it, we’d have to do it ourselves. When I wanted to visit Japan, my dad paid for half, but it was up to me to come up with the other half so I could travel. It took me a year to save for that trip, and it felt so good once I was on the plane knowing I had worked hard to make it happen.

Q: What’s the best piece of advice about money that anyone ever gave you?

A: Respect it.

 

(Editing by Lauren Young and David Gregorio)
Published at Thu, 16 Mar 2017 13:09:45 +0000

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Snap shares drop 4 percent, fall below $20 for the first time

 

Snap shares drop 4 percent, fall below $20 for the first time

Snap Inc shares tumbled below $20 on Thursday for the first time since the company’s $3.4 billion public listing after the Snapchat owner received another “sell” rating from an analyst.

The social media company this month pulled off the hottest technology offering in three years, but after two days of explosive gains its stock has steadily retreated from a peak of more than $29 as investors worry about Snap’s high valuation and lack of profitability.

Snap was down 4 percent at $19.92 in afternoon trade.

(For a graphic on Snap Inc since its IPO, click bit.ly/2mzcuP2)

MoffettNathanson analyst Michael Nathanson on Thursday launched coverage of Snap with a “sell” rating, warning in a note that “the market has priced SNAP for perfection.”

Others on Wall Street have flagged Snap’s slowing user growth, widening losses and lack of voting rights for outside investors. Snap has warned it may never be profitable.

Including Nathanson, six analysts recommend selling shares of Snap, while three have neutral ratings and none recommend buying, according to Thomson Reuters data.

The stock remains up 17 percent from its $17 IPO price set on March 1.

 

(Reporting by Noel Randewich; Editing by Meredith Mazzilli)
Published at Thu, 16 Mar 2017 19:20:36 +0000

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Will Airline Stocks Recover from Winter Storm Stella?

by winterseitler from Pixabay

 

Will Airline Stocks Recover from Winter Storm Stella?

By Justin Kuepper | March 15, 2017 — 12:26 PM EDT

Winter storm Stella grounded more than 5,000 flights on Monday and Tuesday, which has taken a toll on an already-struggling airline industry.

United Continental Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL) fell 7.5% and 2.5% over the past week, respectively. The U.S. Global Jets ETF (JETS) – which tracks the larger airline and parts industries – fell around 2.85% over the past week.

The industry has already been struggling with struggling unit revenue that led Delta, American Airlines, and Southwest Airlines to lower their forecasts for the first quarter of 2017. Rising fuel costs and adverse weather conditions were two of the causes cited by the airlines in their downgrades. Labor costs are also on the rise as unions negotiate new deals at higher costs while the revised travel ban announced by president Trump could hurt revenue.

Despite these concerns, Warren Buffett has been an avid buyer of American Airlines Inc. (AAL), Delta, Southwest Airlines Inc. (LUV), and United Continental. The billionaire investor is betting that the consolidation since 2005 will help control costs and avoid trade wars, while improving metrics like passenger revenue per available seat mile (“PRASM”) over the long-term.

On a technical level, United Continental could see significant support at around $61.50 and its 200-day moving average at $58.77. The Moving Average Convergence Divergence (MACD) remains in a bearish downtrend, but the Relative Strength Index (RSI) stands at highly oversold levels at 34.08. Traders should watch for a rebound from trend line support to re-test its highs of around $75.00 to $77.50 or a breakdown below these support levels.

Delta Airlines could similarly see support at its 200-day moving average at 43.04 or trend line support at around $42.00. Looking at technical indicators, the RSI appears oversold at 39.58 but the MACD remains in a long-term bearish downtrend.

Traders should watch airlines stocks for a rebound or breakdown from these key upcoming support trend lines. With the winter storm ending, airlines are likely to see a rebound from oversold conditions, but the long-term picture remains a little more cloudy.

Stock charts courtesy of StockCharts.com. Author holds positions in stocks mentioned via mutual funds and ETFs.
Published at Wed, 15 Mar 2017 16:26:00 +0000

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Fed raises rates as job gains, firming inflation stoke confidence

 

Fed raises rates as job gains, firming inflation stoke confidence

By Howard Schneider and Jason Lange| WASHINGTON

The U.S. Federal Reserve raised interest rates on Wednesday for the second time in three months, a move spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank’s target.

The decision to lift the target overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent marked one of the Fed’s most convincing steps yet in the effort to return monetary policy to a more normal footing.

However, the Fed’s policy-setting committee did not flag any plan to accelerate the pace of monetary tightening. Although inflation is “close” to the Fed’s 2 percent target, it noted that goal was “symmetric,” indicating a possible willingness to allow prices to rise at a slightly faster pace.

Further rate increases would only be “gradual,” the Fed said in its policy statement, with officials sticking to their outlook for two more rate hikes this year and three more in 2018. The Fed lifted rates once in 2016.

Business investment “appears to have firmed somewhat,” the Fed said in language that reflected a stronger sense of the economy’s momentum.

Fresh economic forecasts released with the statement showed little change from those of the December policy meeting and gave little indication the Fed has a clear view of how the policies of Donald Trump’s administration may impact the economy in 2017 and beyond.

“With gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace,” the Fed said, maintaining language it has used in previous statements.

Stock markets extended their gains .SPX and bond yields fell on the benign economic outlook and the continued steady path of interest rate rises signaled by the central bank.

“It relieves some of the fears we’ve had that perhaps the Fed was going to raise rates faster in the future. They’ve chosen not to signal that,” said Brad McMillan, Chief Investment Officer at Commonwealth Financial.

The Fed’s projections showed the economy growing by 2.1 percent in 2017, unchanged from the December forecast. The median estimate of the long-run interest rate, where monetary policy would be judged as having a neutral effect on the economy, held steady at 3.0 percent.

The unemployment rate Fed officials expect by the end of the year was unchanged at 4.5 percent, while core inflation was seen as slightly higher at 1.9 percent versus the previous 1.8 percent forecast.

Fed Chair Janet Yellen is scheduled to hold a press conference at 2:30 p.m. ET to discuss the policy statement.

The rate increase comes amid a broad improvement in the world economic outlook and a sense among Fed policymakers that the U.S. economy is close to the central bank’s employment and inflation goals.

According to the policy statement, risks to the outlook remained “roughly balanced,” the Fed said.

Minneapolis Fed President Neel Kashkari was the only official to dissent in Wednesday’s decision, saying he preferred to leave rates unchanged.

(Reporting by Howard Schneider and Jason Lange; Editing by Paul Simao and David Chance)

 

 
Published at Wed, 15 Mar 2017 19:46:04 +0000

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Donald Trump’s Real Net Worth: $3.5 billion

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Donald Trump’s Real Net Worth: $3.5 billion

By Aaron Hankin | Updated March 14, 2017 — 10:01 PM EDT

The net worth of President-elect Donald J. Trump was a popular story in last year’s presidential election. He has said on multiple occasions that his net worth is around $10 billion. But, if you take the average of the three best outside estimates, Donald Trump’s net worth is actually $3.5 billion.

What we did just learn from David Cay Johnston’s DCReport.org article on Trump’s 2005 Form 1040 is that, in that year, Trump and his new wife, Melanija Knavs, earned $153 million. They paid $36.6 million in federal taxes that year, a tax rate of 24%. In a statement, the White House confirmed that the document, which appeared in Johnston’s mailbox and was shared with the White House, is real.

This glimpse of the Trumps’ returns are a snapshot of one year. They do not reveal his entire net worth.

Here’s what we do know about that worth and how it breaks down:

In May, Trump released his Personal Financial Disclosure (PFD) forms with the Federal Election Commission (FEC). In true Trump fashion, he was quick to let everyone know. “I filed my PFD, which I am proud to say is the largest in the history of the FEC,” Trump said.

The PFD revealed Trump had:

  • At least $1.4 billion in assets, which includes 40 Wall St, the Trump Tower, golf course resorts in Florida, NY, NJ and Scotland and an aircraft, all which are valued at over $50 million.
  • Over $300 million in income from the golf courses and resorts.
  • Over $100 million in rental income and sales from his property.
  • At least $25 million in Blackrock’s Obsidian fund.
  • Liabilities, which include debt of $50 million or more on each of the following; the Trump Tower, 40 Wall Street, Trump National Doral, Trump International Hotel and Trump Old Post Office.

Forbes recently reduced its estimate of Donald Trump’s net worth to $3.7 billion, down from $4.5 billion earlier this year. Forbes said the softening of the high end retail and commercial property market in New York City is to blame for the $800 million reduction. In their reassessment, Forbes looked at 28 assets of which they said 18 had declined in value since the last estimate.

Fortune magazine say Trump is worth $3.9 billion, up from $3.7 billion in 2015. Fortune states the revenue he discloses in the PFD does not fit someone with a net worth of $10 billion. However, they believe the Presidential campaign is having a positive effect on his worth. “Rather than damaging his brand, Trump’s notoriety appears to be boosting his business, and making him even wealthier. By our best calculations, Trump’s net worth has indeed grown over the 10 months since the last filing,” Fortune said.

The Bloomberg Billionaires Index estimated Trump to be worth $3 billion, up from $2.9 billion in 2015. Bloomberg notes the toughest calculation is his brand. While Trump estimates his brand to be worth $3.3 billion, Bloomberg valued it at just $35 million.

Whether it’s $3 billion or $10 billion, as he claims, it’s safe to assume he is a billionaire, so the exact amount doesn’t really matter. However, Trump campaigned for the presidency on the size of his wealth. “I’m really rich. I’ll show you in a second. I’m not saying that in a bragging way,” Trump said when announcing his Presidential bid in 2015.

Any concrete estimates of his wealth would require a detailed look at his tax returns, which he continues to withhold. Two pages of his 2005 Form 1040 are just a quick look at one year.
Published at Wed, 15 Mar 2017 02:01:00 +0000

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CBO: 14M to Lose Healthcare by 2018 Under GOP Plan

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CBO: 14M to Lose Healthcare by 2018 Under GOP Plan

By David Floyd | Updated March 14, 2017 — 1:07 PM EDT

On Monday the Congressional Budget Office (CBO), the nonpartisan research arm of Congress, released an analysis of the Obamacare​ replacement proposed by Republican Speaker of the House Paul Ryan. According to the document, 14 million fewer Americans would have health insurance by 2018 under the plan, and that figure would rise to 24 million by 2026.

Health and Human Services secretary Tom Price told reporters following the analysis’ release, “we strenuously disagree” with the findings.

Altogether, 52 million people would lack health insurance in 2024, compared to a projection of 28 million under current law. Much of that increase would come as a result of the repeal of the individual mandate, which penalizes those who do not purchase health insurance. Many currently insured people, the CBO writes, “chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.” (See also, Obamacare Costs Up for 2017.)

The CBO estimates that the Republican plan would reduce federal outlays by $1.2 trillion from 2017 to 2026 and receipts by $0.9 trillion over the same period. As a result, the deficit would fall by $337 billion. Most of the reduction would come from a reduction in Medicare spending and subsidies for non-group health insurance.

The CBO’s analysis forecasts a temporary rise in health premiums under the proposed replacement. Relative to projections under current law, premiums would be higher in 2018 and 2019, though they would be lower after 2020. Eliminating the individual mandate would lessen the incentives for healthy people to sign up for insurance, raising premiums by 15% to 20% relative to current law. By 2026, however, premiums would be around 10% lower than projections under current law.

The CBO does not foresee the bill destabilizing health insurance markets; it also states that markets would remain stable under current law. Critics of both Obamacare and its potential repeal have warned of a “death spiral,” in which healthy customers opt out of insurance markets, causing costs per head and thus premiums to rise, and driving more healthy people out of the market. (See also, Is the Affordable Care Act Failing?)

Republicans strongly opposed the passage of the Affordable Care Act – now known universally as Obamacare – in 2010, and President Donald Trump campaigned on a promise to repeal and replace the law, which he called a “disaster.” Ryan proposed the bill under consideration by the CBO on March 7, but its reception among Republicans was mixed. Trump endorsed the proposal the day it was unveiled, though he tweeted a promise that “phase 2 & 3” would allow insurance to be sold across state lines. He promised to introduce such a reform repeatedly during the campaign, but it does not appear in the House bill. “Don’t worry,” Trump wrote, adding that a plan to reduce drug prices was also forthcoming. (See also, The Beginning of the End of Obamacare.)

Other Republicans were even less enthusiastic. Representative Jim Jordan of Ohio called it “Obamacare in a different form,” summing up many hardliners’ dissatisfaction. Moderate Republicans such as Maine Senator Susan Collins worried that too many patients would lose coverage. A number of groups representing hospitals and physicians came out against the plan. (See also, 7 Industries Benfiting From Obamacare.)

The American Health Care Act, as the new bill is known, would eliminate the penalties associated with the individual mandate. As a substitute, it would add a 30% surcharge to premiums for patients who have gone without insurance for 63 days within the past year. Beginning in 2020, it would reduce the federal matching rate for adults made eligible for Medicare by Obamacare. It would limit spending on Medicare beneficiaries based on the medical consumer price index beginning in 2020. (See also, Why a Repeal of Obamacare Could Be a Boon for Wealthy Investors.)

It would eliminate Obamacare’s subsidies beginning in 2020 and replace them with tax credits. It would provide Medicare funding through block grants to states and allow insurers to charge older patients five times as much as younger ones, rather than the current ratio of three times. Beginning in 2020, it would eliminate the requirement that insurers cover at least 60% of the costs of covered benefits. (See also, 6 Things Obamacare Plans Won’t Cover.)

Perhaps anticipating the tenor of the analysis, White House press secretary Sean Spicer sowed doubt regarding the CBO’s competence on March 8, saying, “If you’re looking at the CBO for accuracy, you’re looking in the wrong place.” In 2010 the CBO significantly overestimated the number of people who would be insured under Obamacare in 2016, forecasting that 30 million fewer people would be uninsured than if the law had not been passed. In 2016, following a Supreme Court ruling and other developments, it revised that estimate down to 22 million.
Published at Mon, 13 Mar 2017 22:16:00 +0000

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CVS Antes Up Again in Its Fight to End Tobacco Use

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CVS Antes Up Again in Its Fight to End Tobacco Use

By Daniel B. Kline | March 13, 2017 — 1:05 PM EDT

CVS Health (NYSE: CVS) made headlines in 2014 when it took the then-shocking step of eliminating all tobacco products from its stores.

At the time, CEO Larry Merlo called the move “simply the right thing to do for the good of our customers and our company,” adding that “the sale of tobacco products is inconsistent with our purpose – helping people on their path to better health.” Those were bold statements, and CVS not only went through with getting rid of tobacco, it has aggressively funded anti-smoking efforts.

Now, more than two years after tobacco was last sold in its stores, the company says it plans to fund $10 million in new and expanded programs as part of an effort to create the first tobacco-free generation. The money will support the second year of “Be The First,” CVS’ five year, $50 million commitment to getting young people to stop (or never start) smoking.

“Tobacco continues to be the leading cause of preventable disease and death in the United States, yet 2,100 youth and young adults still become daily cigarette smokers,” said CVS Chief Medical Officer Troyen Brennan in a press release. “CVS Health recognizes that by bringing together experts in the public health community and aggressively implementing strategies to reduce tobacco use, we have the opportunity to deliver the first tobacco-free generation.”

What is CVS doing?

The chain not only sacrificed sales when it dropped tobacco, it has also made a real commitment to ending smoking, specifically among young people. Be the First offers “anti-smoking education, tobacco-control advocacy, and healthy behavior programming,” according to the company. The program, which was launched in March 2016, targets the 3 million elementary school children in the U.S. who “without early tobacco education, may become future tobacco users” as well as adult smokers who may expose children to tobacco use. The program has reached nearly 5 million young people, and it has helped 20 colleges and universities work toward becoming 100% smoke-and tobacco-free.

“In the year since we introduced Be The First, we’ve seen very good progress, but we know there is much more to be done in schools, on college campuses and in our communities,” said CVS Health Foundation President Eileen Howard Boone. “We’re pleased to sustain this momentum by expanding partnerships with best-in-class organizations and identifying new partners that will bring the expertise needed to move us one step closer to the first tobacco-free generation.”

This is about more than business

Dropping tobacco was not a purely altruistic decision for CVS. Selling cigarettes clashed with the image it was trying to create as a company that cares about people’s health, and getting out of the business of profiting from a product that causes disease was good public relations.

Still, CVS could have simply done that. It didn’t have to take up ending smoking among young people as a cause, nor did it have to put up $50 million to do it. However, in this is a case, doing the right thing is also the correct thing for the business. The positive public relations will be worth far more to the company than the money it’s spending.

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Published at Mon, 13 Mar 2017 17:05:02 +0000

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Bottled Water: ‘Marketing Trick of the Century’

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Bottled Water: ‘Marketing Trick of the Century’

By Shoshanna Delventhal | March 11, 2017 — 12:22 PM EST

After decades of strong growth, bottled water has surpassed soda as the largest beverage category in the U.S., according to a recent report by research and consulting firm Beverage Marketing Corporation.

Bottled water consumption hit a high of 39.3 gallons per capita last year. Over the same period, soda sales slipped to 38.5 gallons per capita, compared to 50+ gallons gulped down per capita in the late 1990s. The shift has been driven by a myriad of factors, including widespread concerns about the health of sugar and artificial flavorings and local soda taxes. (See also: Beer, Soda Cos. Get in on Sparking Water Trend.)

Tap Water Alternative as Soda Replacement

“Bottled water effectively reshaped the beverage marketplace,” said Michael C. Bellas, Beverage Marketing’s chairman and chief executive. “When Perrier first entered the country in the 1970s, few would have predicted the heights to which bottled water would eventually climb.” In other words, Bellas was speaking to the long tradition of drinking clean, free tap water. “Where once it would have been unimaginable to see Americans walking down the street carrying plastic bottles of water, or driving around with them in their cars’ cup holders, now that’s the norm.”

“The marketing trick of the century” said John Jewell of The Week in 2014, relies on convincing consumers that bottled water is a healthier alternative to soda, when in reality it is an alternative to tap water. As consumers shied away from sugary soft drinks, major beverage businesses were able to play on the habit of buying a beverage by bottling a nearly free commodity in plastic and printing a label on it. Perhaps the greatest irony is that buying bottled water works against the goals of “health and eco-conscious” consumers by contributing to environmental degradation, supporting large corporations and spending 2,000 times what they would have compared to tap water, writes Business Insider.

Doubling Down on ‘Premium’ Water

To the further benefit of bottled water suppliers, the companies are not held to the same standards and reporting requirements as tap water suppliers. A study conducted by the Environmental Working Group in 2008 identified 38 pollutants in 10 brands of bottled water, while 20% of the brands were indistinguishable from tap water.

Despite the availability of fresh drinking water across most of North America, consumer habits are often more shaped by advertising campaigns than rational choice. Beverage giants such as PepsiCo Inc. (PEP) and The Coca-Cola Co. (KO) will not simply roll over as soda sales die, rather, they are doubling down on the booming bottled water industry. Pepsi’s most recent Super Bowl ad for its LIFEWTR brand demonstrates the firm’s commitment to reeling in consumers with a new “premium-water” offering. (See also: New CEO: Coca-Cola Has ‘Outgrown’ Namesake Drink.)
Published at Sat, 11 Mar 2017 17:22:00 +0000

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Volkswagen pleads guilty in U.S. court in diesel emissions scandal

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Volkswagen pleads guilty in U.S. court in diesel emissions scandal

By Nick Carey and David Shepardson| DETROIT/WASHINGTON

Volkswagen AG (VOWG_p.DE) pleaded guilty on Friday to fraud, obstruction of justice and falsifying statements as part of a $4.3 billion settlement reached with the U.S. Justice Department in January over the automaker’s diesel emissions scandal.

It was the first time the company has pleaded guilty to criminal conduct in any court in the world, a company spokesman said, and comes as the automaker strives to put the most expensive ever auto industry scandal behind it.

The September 2015 disclosure that VW intentionally cheated on emissions tests for at least six years led to the ouster of its chief executive, damaged the company’s reputation around the world and prompted massive bills.

In total, VW has agreed to spend up to $25 billion in the United States to address claims from owners, environmental regulators, states and dealers and offered to buy back about 500,000 polluting U.S. vehicles.

Volkswagen’s general counsel Manfred Doess made the plea on its behalf after he said at a hearing in U.S. District Court in Detroit that he was authorized by the company’s board of directors to enter a guilty plea.

“Your honor, VW AG is pleading guilty to all three counts because it is guilty on all three counts,” Doess told the court.

U.S. District Judge Sean Cox accepted the company’s guilty plea to conspiracy to commit fraud, obstruction and entry of goods by false statement charges and set an April 21 sentencing date, where he must decide whether to approve the terms of the plea agreement.

Investors in VW stock took the news in stride after the expected guilty plea, sending shares up slightly in Germany to close up 0.3 percent at 143.70 euros.

VW has agreed to spend up to $10 billion to buy back diesels that emit up to 40 times legally allowable pollution, along with at least $5,100 per owner in additional compensation.

Cox said he was considering a motion made by a lawyer for some owners on whether to allow additional restitution for victims.

“This a very, very, very serious crime. It is incumbent on me to make a considered decision,” Cox said.

The Justice Department and VW have argued that the automaker has already agreed to significant restitution.

“Volkswagen deeply regrets the behavior that gave rise to the diesel crisis. The agreements that we have reached with the U.S. government reflect our determination to address misconduct that went against all of the values Volkswagen holds so dear,” the company said in a statement. “Volkswagen today is not the same company it was 18 months ago.”

 

REFORMS

Under the plea agreement, VW agreed to sweeping reforms, new audits and oversight by an independent monitor for three years after admitting to installing secret software in 580,000 U.S. vehicles. The software enabled it to beat emissions tests over a six-year period and emit up to 40 times the legally allowable level of pollution.

An assistant U.S. attorney, John Neal, told the court that the emissions scheme “was a well thought-out, planned offense that went to the top of the organization.” He said VW could have faced $17 billion to $34 billion in fines under sentencing guidelines.

Volkswagen agreed to change the way it operates in the United States and other countries under the settlement. VW, the world’s largest automaker by sales, in January agreed to pay $4.3 billion in U.S. civil and criminal fines.

The company still faces ongoing investigations stemming from the excess emissions by the U.S. Securities and Exchange Commission, Internal Revenue Service and some U.S. states. New York Attorney General Eric Schneiderman told Reuters last month that there have been recent settlement talks, but didn’t elaborate.

The German automaker halted sales of diesel vehicles in late 2015 and has said it has no plans to resume sales of new U.S. diesels.

The Justice Department also charged seven current and former VW executives with crimes related to the scandal. One executive is in custody and awaiting trial and another pleaded guilty and agreed to cooperate. U.S. prosecutors said in January that five of the seven are believed to be in Germany. They have not been arraigned.

German prosecutors also have an ongoing criminal probe into VW’s excess diesel emissions.

VW Chairman Hans Dieter Poetsch said Monday the company expects to broaden disciplinary action beyond the two dozen employees it has already suspended.

As part of its U.S. emission settlements, VW agreed to spend nearly $3 billion to offset excess emissions and make $2 billion in investments in zero emission vehicle infrastructure and awareness programs over a decade.

(Writing by David Shepardson in Washington. Additional reporting by Jan C. Schwartz in Hamburg, Germany; Editing by Bernadette Baum)
Published at Fri, 10 Mar 2017 18:34:29 +0000

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