Tag: Chase

How To Protect Yourself From Overdraft Fees

Citing the impact of Covid-19 on many consumers’ finances, some banks, including Ally Bank and KeyBank, have stopped charging overdraft fees or have offered relief from them. Other banks, however, have gone in a different direction. Between March 13, 2020, and September 20, 2021, account holders filed over 1,600 complaints against various banks to the Consumer Financial Protection Bureau (CFPB) about overdraft fees, the agency’s records show.

“Wells Fargo picks and chooses when they are going to charge overdraft fees and when they are going to pay a bill or not,” one complaint filed against Wells Fargo on September 1, 2021, reads. “I will go to sleep and my account [is] positive and there is enough to cover pending charges. Then all of sudden days later the date of the [charge] is changed and I have been charged an overdraft fee. They have recently even had notices within the app that says your balance amount may not be accurate.”

These fees, which can be as high as $35 per overdraft transaction, are an incredible hardship for some consumers. As the complaint continues, “I have a second chance checking account and because of some hardships I am limited in who I can bank with. I feel like Wells Fargo takes advantage of the underprivileged.”

Overdraft fees composed $2.32 billion of those service charges in Q4, a 64 percent spike from Q2 2020

Though some US banks temporarily paused on charging overdraft and other service fees, an analysis of banks with more than $1 billion in assets and some smaller institutions that chose to disclose data suggests that banks are on their way to charging service fees at pre-pandemic levels even as the Covid-19 pandemic resurges.

A March 2021 report from S&P Global Market Intelligence indicated that banks collected $3.6 billion in service fees in the fourth financial quarter of 2020. Overdraft fees composed $2.32 billion of those service charges in the quarter, a 64 percent spike from just six months prior in the second quarter of 2020, the report noted.

Put simply, these fees amount to another tax on the poor, an extraction from the country’s poorest Americans to its wealthiest banks, experts say. Overdraft fees are meant to safeguard banks from risks associated with covering account holders’ overspending, but they can disproportionately hurt low-income consumers who need protection the most, experts told Vox.

Lawmakers and advocacy groups had called for the curtailing of these fees even before the Covid-19 pandemic disrupted the US economy. Now, the call to regulate bank fees has returned as the coronavirus crisis continues to upend consumers’ financial lives.

Why do banks charge account maintenance and overdraft fees?

The FDIC defines overdraft fees as a fee assessed whenever an account holder spends more than what’s in their account. Banks may also charge an account maintenance fee, also known as monthly service fees, just for having the account or for falling below a certain minimum balance, per the FDIC. Banks, of course, can charge a range of other fees, including ATM use fees, per-check fees, and stop-payment fees.

It’s hard to pinpoint when banks began charging overdraft fees in the US. Vox reached out to JPMorgan Chase, Wells Fargo, and Bank of America to ask when they started charging account maintenance and overdraft fees, but none of them shared when they implemented these charges.

According to a 2020 report from the Center for Responsible Lending, banks historically declined debit card charges when account holders lacked the funds to cover charges. But over time, banks — at the urging of software consultants who were promoting overdraft programs on a contingency fee basis — began allowing overdraft transactions to go through and charging customers fees.

“I think that at some point it was clear that it was a helpful situation, so that bills didn’t bounce, checks didn’t bounce, mortgage payments didn’t bounce,” said Peter Smith, senior researcher at the Center for Responsible Lending. “This was a fairly informal service, but when people started using debit cards more [and] people started using electronic payments more, I think banks began to see this as an opportunity for revenue and not just a convenience service they could offer their account holders.”

“I think banks began to see this as an opportunity for revenue and not just a convenience service they could offer their account holders”

Though overdraft fees can be costly for low-income households, they make up a small share of banks’ overall income. Per the Center for Responsible Lending’s analysis, bank overdraft fees average $35. That fee tends to be higher than the value of the transaction that triggers it, which is $20 on average. For banks with assets of $1 billion or more, overdraft or insufficient funds fees are about 5 percent of their non-interest income, the report noted.

Banks charge overdraft fees to account for the risks associated with covering charges on overdrawn accounts, said Deeksha Gupta, assistant professor of finance at the Tepper School of Business at Carnegie Mellon University. Though banks are profitable without charging these fees, they want to avoid risks for paying merchants’ charges and deter account holders from overspending, Gupta said.

Bank fees’ impact on vulnerable consumers

Banks don’t want to take on the risks of covering consumers’ overdrawn transactions, but it remains up for debate whether the fee is truly worth it given its impact on low-income consumers. Overdraft fees tend to prey upon low-income consumers, Rebecca Borné, senior policy counsel at the Center for Responsible Lending, said. The center’s 2020 report found that 9 percent of bank account holders pay 84 percent of the more than $11 billion overdraft fees banks collect every year.

Borné said while other fees serve a function — it does cost banks to administer checking accounts, rendering account maintenance fees somewhat necessary, for instance — with overdraft, the effect is different. Besides charging a high overdraft fee per transaction with insufficient funds, banks engage in a range of practices that can leave customers with compounding overdraft fees, including charging more than one fee per day, charging fees for debit card purchases and ATM withdrawals, and imposing another overdraft fee if previous fees aren’t paid within a set period of time, the Center for Responsible Lending’s report explained.

As some banks resume charging overdraft fees, pre-pandemic research suggests such fees play a role in excluding unbanked consumers from accessing traditional bank accounts. According to the FDIC’s 2019 How America Banks report, about 5.4 percent (7.1 million) of US households were unbanked, meaning nobody in the household had a checking or savings account at a bank or credit union.

Among the reasons why respondents said they don’t have a bank account: Almost half of respondents said they don’t have enough money to meet minimum balance requirements, and more than a third said bank account fees are too high.

Complaints filed to the CFPB offer a window into consumers’ struggles with overdraft charges. “In … 2021, US Bank had enrolled me into an overdraft protection program which I never authorized. One time I was out traveling and forgot to put money in my checking account, and my balance hit negative. I was unaware and kept using my debit card for small transactions like coffee,” reads one complaint filed August 27 against US Bancorp. “The majority of these transactions are below [$10].

Instead of declining these charges, US Bank charged me a series of overdraft fees, each of them [$36]. In the end, the total overdraft fees ended up being [$360] for over a couple of days. They waived three of them, bringing my loss down to [$250] … Talking to their customer service, they never offered an option to opt out of their overdraft ‘protection’ program. They offered some even more predatory protection options instead which I declined.”

With bank fees pushing consumers away from traditional bank accounts, vulnerable consumers may be driven to use even costlier alternative financial services. According to a May 2020 Federal Reserve report, 16 percent of US adults were underbanked in 2019, meaning they had a traditional bank account, but also used alternative financial services like check cashing services, money orders, and payday loans.

The report also noted that unbanked and underbanked Americans were more likely to have lower education levels, be people of color, or have lower incomes. For consumers who are worried about overdraft fees, they’d rather turn to riskier alternatives instead.

As for why consumers turn to alternative financial services, some consumers have no other option, and these alternatives are actively targeting them. The Federal Reserve report noted that 43 percent of credit applicants with incomes of less than $40,000 were denied credit, compared to 9 percent of applicants who earn more than $100,000.

Even for underbanked consumers who have traditional bank accounts, payday lenders and other high-cost installment lenders aggressively target customers in low-income neighborhoods, communities of color, and people who need extra cash, Borné wrote in a follow-up email. Meanwhile, banks don’t always offer affordable small loans for consumers, and they have little incentive to do so because regulators can allow them to charge high overdraft fees for each overdraft, she added.

“Those who go to payday lenders because they believe they will be in and out of the loan quickly are often stuck for the long term, incurring a lot of overdraft fees when the payments are extracted from their accounts,” Borné wrote. “Ultimately, they often lose their accounts. These wealth-draining products tend to feed each other, creating needs rather than filling them, and leaving customers with fewer credit options down the line.”

“These wealth-draining products tend to feed each other, creating needs rather than filling them”

Gupta agreed underbanked and unbanked consumers are often forced to turn to more expensive alternatives. As the coronavirus pandemic continues with no discernible end in sight and assistance programs come to an end, overdraft and account maintenance fees can compound for households that are struggling now, she added.

“Ideally, the banking system should be helping low-income consumers. We don’t want that type of money to be flowing from lower-income households to banks because they’re in overdraft,” Gupta said of the billions of dollars in overdraft charges.

Even though overdraft fees and other service charges make up a small share of major banks’ revenue, some experts questioned whether limiting these fees would disincentivize banks from offering affordable financial services that could attract low-income consumers. As Gupta explained, some banks could opt not to offer certain affordable bank accounts to avoid taking on additional risk. An April paper from the Consumer Financial Protection Bureau also suggested that capping overdraft fees could cause banks to offer fewer affordable account options for low-income people.

What to do if you’re being charged too much in overdraft fees

Banks could do a better job of disclosing bank fees to consumers, said Desmond Brown, assistant director of the CFPB’s office of consumer education. He said depending on the institution, overdraft fees can be structured in a complex way. Some bank accounts offer the option to opt in to overdraft fees, so consumers should see whether it’s an option to opt out when looking for a new account.

When signing up for a new account, Brown said, consumers concerned about fees should shop around and ask for bank accounts that are tailored to low-income consumers and learn about the bank’s cost structures. Consumers can also look for banks that provide alerts when their funds are low, he added.

Brown also encouraged consumers to file complaints with the agency if they’re experiencing fee problems with their bank. Doing so not only allows CFPB to assist consumers directly, but it also helps the agency assess issues happening in the marketplace, he said.

“If we have seen a spike in an area of complaints, then we can look to other tools at the bureau to help drill down and find out exactly what’s going on, and be more responsive to consumer needs,” Brown said.

For consumers looking for affordable bank accounts, Brown pointed to the FDIC’s Model Safe Accounts program, which works with banks to determine how they can offer affordable bank accounts. Some financial services firms offer accounts with no overdraft or account maintenance fees.

(In their respective statements, JPMorgan Chase said during the pandemic it has waived $650 million in fees, including overdraft fees, between January 2020 and March 2021; and Wells Fargo touted its low-cost, no-overdraft-fee bank account, its zero balance alerts, and its overdraft fee waivers.)

“We’re talking about billions of dollars every single year being drained, disproportionately from Black and brown communities”When asked what the agency is doing to assist consumers who’ve been charged excessive overdraft fees, a CFPB spokesperson said, “Overdrafts have the potential to be very costly for consumers, and we are continuing to closely monitor developments in this area.”

But as consumers file complaints or seek low-cost bank accounts on their own, advocacy groups and lawmakers have pushed for more restrictions on overdraft fees. On June 30, Rep. Carolyn Maloney (D-NY) introduced the Overdraft Protection Act of 2021, a bill that aims to regulate the marketing and charging of overdraft fees at financial firms. During a House Committee on Financial Services hearing on July 21, Borné provided a statement on behalf of the Center for Responsible Lending calling for Congress to hold regulatory agencies like the CFPB to protect consumers from harmful overdraft fee practices.

“What to me is especially frustrating is that financial inclusion is all the buzz in a lot of circles. I feel like in a lot of these conversations people just try to talk around the elephant in the room, which are bank overdraft practices,” said Borné. “We’re talking about billions of dollars every single year being drained, disproportionately from Black and brown communities, and kicking people out of the banking system, eroding trust in banks. It’s just a huge barrier to real financial inclusion.”

By Tatiana Walk-Morris

Source: How to protect yourself from overdraft fees

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Fintechs Are Zeroing in on Everything Big Banks Aren’t

My north star(s) for philosophy, management, and politics are Star Wars, The Sopranos, and Game of Thrones, respectively. The Iron Bank (GoT) is a metaphor for today’s financial institutions, if present-day banks didn’t need bailouts or to invent fake accounts to juice compensation. Regardless, it was well known throughout Braavos that The Iron Bank will have its due.

If you failed to repay, they’d fund your enemies. So today’s Iron Bankers are the venture capitalists funding (any) incumbents’ enemies. If this makes VCs sound interesting/cool, don’t trust your instincts.

Lately, I’ve spent a decent amount of time on the phone with my bank in an attempt to get a home equity line, as I want to load up on Dogecoin. (Note: kidding.) (Note: mostly.) If Opendoor and Zillow can use algorithms and Google Maps to get an offer on my house in 24 hours, why does it take my bank — which underwrote the original mortgage — so much longer?

How ripe a sector is for disruption is a function of several factors. One (relatively) easy proxy is the delta between price increases and inflation, and if the innovation in the sector justifies the delta. Think of the $200 cable bill, or a $5.6 million 60-second Super Bowl spot, as canaries in the ad-supported media coal mine.

Another, easier (and more fun) indicator of ripeness is the eighties test. Put yourself smack dab in the center of the store/product/service, close your eyes, spin around three times, open your eyes, and ask if you’d know within 5 seconds that you were not in 1985. Theaters, grocery stores, gas stations, dry cleaners, university classes, doctor’s offices, and banks still feel as if you could run into Ally Sheedy or The Bangles.

It’s hard to imagine an industry more ripe for disruption than the business of money.

Let’s start with this: 25% of U.S. households are either unbanked or underbanked. Half of the nation’s unbanked households say they don’t have enough money to meet the minimum balance requirements. 34% say bank fees are too high. And, if you’re trying to get a mortgage, you’d better hope the house isn’t cheap.

Inequity is a breeding ground for disruption, leaving underserved markets for insurgents to seize and launch an attack on incumbents from below. We have good reason to believe that’s happening in banking.

Insurgents

A herd of unicorns is at the stable door, looking to trample Wells Fargo and Chase. Fintech is responsible for roughly one in five (17%) of the world’s unicorns, more than any other sector. In addition, there are already several megalodons worth more than financial institutions that have spent generations building (mis)trust.

How did this happen? The fintechs are zeroing in on everything big banks aren’t.

Example #1: Innovation. Over the past five years, PayPal has issued 26x more patents than Goldman Sachs.

Example #2: Cost-cutting. “Neobanks” offer the basic services of a bank, with one less expensive and cumbersome feature: the branch. A traditional bank branch needs $50 million in deposits to generate an adequate return. Yet nearly half (48%) of branches in the U.S. are below that threshold. Neobanks don’t have that problem, and there are now at least 177 of them. Founders frame these offerings as more progressive, less corporate. Dave, a new banking app, offers a Founding Story on its website (illustrated with cartoon bears) about three friends “fed up” with their banking experience, often incurring $38 overdraft fees. Fed up no longer: Dave provides free overdraft protection and has 10 million customers.

Example #3: Less inequity. NYU Professor of Finance Sabrina Howell’s research found fintech lenders gave 18% of PPP loans to Black-owned businesses, while small to medium-sized banks provided just 2%. Among all loans to Black-owned firms, Professor Howell found 54% were from fintech startups. Racial discrimination is the most likely explanation, as lenders faced zero credit risk.

Example #4: Serving the underserved. Unequal access to banking is a global botheration. Almost a third of the world’s adults, 1.7 billion, are unbanked. In Argentina, Colombia, Nigeria, and other countries, more than 50% of adults are unbanked.

But innovation is already on the horizon: Take Argentine fintech Ualá, whose CEO Pierpaolo Barbieri I spoke with on the Pod last week. In just 4 years, more than 3 million people have opened an account with his company — about 9% of the country — and over 25% of 18 to 25-year-olds now have a tarjeta Ualá (online wallet). Ualá recently launched in Mexico, where, as of 2017, only 2.6% of the poorest 40% had a credit card. This is more than an economic issue — it’s a societal issue, as financial inclusion bolsters the middle class and forms a solid base for democracy.

Interest(ed)

Chase savings accounts are offering, no joke, 0.01% interest. Wells Fargo? The same, though if you keep your investment portfolio with Wells, they’ll double that rate to 0.02%. Meanwhile, neobanks including Ally and Chime offer 0.5% — 50 times the competition.

There is also blood in the water for fintech unicorns that have created a debit, vs. credit, generation: The buy-now-pay-later fintech Afterpay has more than 5 million U.S. customers — just two years after launching in the country. As of February, its competitor Affirm has 4.5 million customers.

Unicorns are also coming for payments. The megasaurus in this space is PayPal, which has built the first global payments platform outside the credit card model and is second only to Visa in payment volume and revenue. Square’s Cash app is capturing share, and Apple Cash is also a player, as it’s … Apple.

Square, Apple, and a host of other companies are taking the “partnership” approach, bolting new services onto the existing transaction infrastructure. Square’s little white box is a low-upfront-cost way for a small merchant to accept credit cards. It’s particularly interesting that Apple teamed up with Goldman Sachs instead of a traditional bank. Goldman is looking to get into the consumer space (see Marcus), and Apple is looking to get into the payments space — this alliance could be the unsullied fighting with air cover from dragons. It should make Wells and BofA anxious.

The Big Four credit card system operators (Visa, MasterCard, Discover, and American Express) are still the dominant payment players, and they have deep moats. Their brands are global, their networks robust. Visa can handle 76,000 transactions per second in 160 currencies, and as of this week it had settled $1 billion in cryptocurrency transactions.

Still, even the king of payments sees dead people. In 2020, Visa tried to buy Plaid for $5.3 billion. Plaid currently helps connect existing payments providers (i.e. banks) to finance software such as Quicken and Mint. But it plans to expand from that beachhead into offering a full-fledged payments system. Visa CEO Al Kelly initially described the deal as an “insurance policy” to neutralize a “threat to our important U.S. debit business.” In an encouraging sign that American antitrust authorities are stirring, the Department of Justice filed suit to block the merger, and Visa walked.

Beyond Banking

Fintech is also coming for investing with online trading apps (Robinhood, Webull, Public, and several of the neobanks) and through the crypto side door (Coinbase, Gemini, Binance). Insurance is under threat from companies like Lemonade (home), Ladder (life), and Root (auto).

In sum, fintech is likely as underhyped as space is overhyped. Why? The ROI on your professional efforts and investing are inversely proportional to how sexy the industry/investment is, and fintech is … boring. Except for the immense opportunity and value creation — for multiple stakeholders. “Half the world is unbanked, but we need to colonize Mars,” said no rational investor ever.

Re: investing in fintech: What has, and will always be, a good rap? The guy/gal who owns the bank.

Life is so rich,

By: Scott Galloway

Source: Fintechs Are Zeroing in on Everything Big Banks Aren’t | by Scott Galloway | Jul, 2021 | Marker

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How To Squeeze Yields Up To 6.9% From Blue-Chip Stocks

Closeup of blue poker chip on red felt card table surface with spot light on chip

Preferred stocks are the little-known answer to the dividend question: How do I juice meaningful 5% to 6% yields from my favorite blue-chip stocks? “Common” blue chips stocks usually don’t pay 5% to 6%. Heck, the S&P 500’s current yield, at just 1.3%, is its lowest in decades.

But we can consider the exact same 505 companies in the popular index—names like JPMorgan Chase (JPM), Broadcom (AVGO) and NextEra Energy (NEE)—and find yields from 4.2% to 6.9%. If we’re talking about a million dollar retirement portfolio, this is the difference between $13,000 in annual dividend income and $42,000. Or, better yet, $69,000 per year with my top recommendation.

Most investors don’t know about this easy-to-find “dividend loophole” because most only buy “common” stock. Type AVGO into your brokerage account, and the quote that your machine spits back will be the common variety.

But many companies have another class of shares. This “preferred payout tier” delivers dividends that are far more generous.

Companies sometimes issue preferred stock rather than issuing bonds to raise cash. And these preferred dividends have a few benefits:

  • They receive priority over dividends paid on common shares.
  • Sometimes, preferred dividends are “cumulative”—if any dividends are missed, those dividends still have to be paid out before dividends can be paid to any other shareholders.
  • They’re typically far juicier than the modest dividends paid out on common stock. A company whose commons yield 1% or 2% might still distribute 5% to 7% to preferred shareholders.

But it’s not all gravy.

You’ll sometimes hear investors call preferreds “hybrid” securities. That’s because they act like a part-stock, part-bond holding. The way they resemble bonds is how they trade around a par value over time, so while preferreds can deliver price upside, they don’t tend to deliver much.

No, the point of preferreds is income and safety.

Now, we could go out and buy individual preferreds, but there’s precious little research out there allowing us to make a truly informed decision about any one company’s preferreds. Instead, we’re usually going to be better off buying preferred funds.

But which preferred funds make the cut? Let’s look at some of the most popular options, delivering anywhere between 4.2% to 6.9% at the moment.

Wall Street’s Two Largest Preferred ETFs

I want to start with the iShares Preferred and Income Securities (PFF, 4.2% yield) and Invesco Preferred ETF (PGX, 4.5%). These are the two largest preferred-stock ETFs on the market, collectively accounting for some $27 billion in funds under management.

On the surface, they’re pretty similar in nature. Both invest in a few hundred preferred stocks. Both have a majority of their holdings in the financial sector (PFF 60%, PGX 67%). Both offer affordable fees given their specialty (PFF 0.46%, PGX 0.52%).

There are a few notable differences, however. PGX has a better credit profile, with 54% of its preferreds in BBB-rated (investment-grade debt) and another 38% in BB, the highest level of “junk.” PFF has just 48% in BBB-graded preferreds and 22% in BBs; nearly a quarter of its portfolio isn’t rated.

Also, the Invesco fund spreads around its non-financial allocation to more sectors: utilities, real estate, communication services, consumer discretionary, energy, industrials and materials. Meanwhile, iShares’ PFF only boasts industrial and utility preferreds in addition to its massive financial-sector base.

PGX might have the edge on PFF, but both funds are limited by their plain-vanilla, indexed nature. That’s why, when it comes to preferreds, I typically look to closed-end funds.

Closed-End Preferred Funds

CEFs offer a few perks that allow us to make the most out of this asset class.

For one, most preferred ETFs are indexed, but all preferred CEFs are actively managed. That’s a big advantage in preferred stocks, where skilled pickers can take advantage of deep values and quick changes in the preferred markets, while index funds must simply wait until their next rebalancing to jump in.

Closed-end funds also allow for the use of debt to amplify their investments, both in yield and performance. Should the manager want, CEFs can also use options or other tools to further juice returns.

And they often pay out their fatter dividends every month!

Take John Hancock Preferred Income Fund II (HPF, 6.9% yield), for example. It’s a tighter portfolio than PFF or PGX, at just under 120 holdings from the likes of CenterPoint Energy (CNP), U.S. Cellular (USM) and Wells Fargo (WFC).

Manager discretion means a lot here. That is, HPF doesn’t just invest in preferreds, which are 70% of assets. It also has 22% invested in corporate bonds, another 4% or so in common stock, and trace holdings of foreign stock, U.S. government agency debt and cash. And it has a whopping 32% debt leverage ratio that really helps prop up the yield and provide better returns (though at the cost of a bumpier ride).

You have a similar situation with Flaherty & Crumrine Preferred and Income Securities Fund (FFC, 6.7%).

Here, you’re wading deep into the financial sector at nearly 80% exposure, with decent-sized holdings in utilities (7%) and energy (7%). Credit quality is roughly in between PFF and PGX, with 44% BBB, 37% BB and 19% unrated.

Nonetheless, smart management selection (and a healthy 31% in debt leverage) has led to far better, albeit noisier, returns than its indexed competitors. The Cohen & Steers Select Preferred and Income Fund (PSF, 6.0%) is about as pure a play as you could want in preferreds.

And it’s also a pure performer.

PSF is 100% invested in preferred stock (well, more like 128% if you count debt leverage), and actually breaks out its preferreds into institutionals that trade over-the-counter (83%), retail preferreds that trade on an exchange (16%) and floating-rate preferreds that trade OTC or on exchanges (1%).

Like any other preferred fund, you’re heavily invested in the financial sector at nearly 73%. But you do get geographic diversification, as only a little more than half of PSF’s assets are invested in the U.S. Other well-represented countries include the U.K. (13%), Canada (7%) and France (6%).

What’s not to love?

Brett Owens is chief investment strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: Your Early Retirement Portfolio: 7% Dividends Every Month Forever.

Brett Owens

Brett Owens

I graduated from Cornell University and soon thereafter left Corporate America permanently at age 26 to co-found two successful SaaS (Software as a Service) companies. Today they serve more than 26,000 business users combined. I took my software profits and started investing in dividend-paying stocks. Today, it’s almost impossible to find good stocks that pay a quality yield. So I employ a contrarian approach to locate high payouts that are available thanks to some sort of broader misjudgment. Renowned billionaire investor Howard Marks called this “second-level thinking.” It’s looking past the consensus belief about an investment to map out a range of probabilities to locate value. It is possible to find secure yields of 6% or more in today’s market – it just requires a second-level mindset.

Source: How To Squeeze Yields Up To 6.9% From Blue-Chip Stocks

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Critics:

A blue chip is stock in a stock corporation (contrasted with non-stock one) with a national reputation for quality, reliability, and the ability to operate profitably in good and bad times. As befits the sometimes high-risk nature of stock picking, the term “blue chip” derives from poker. The simplest sets of poker chips include white, red, and blue chips, with tradition dictating that the blues are highest in value. If a white chip is worth $1, a red is usually worth $5, and a blue $25.

In 19th-century United States, there was enough of a tradition of using blue chips for higher values that “blue chip” in noun and adjective senses signaling high-value chips and high-value property are attested since 1873 and 1894, respectively. This established connotation was first extended to the sense of a blue-chip stock in the 1920s. According to Dow Jones company folklore, this sense extension was coined by Oliver Gingold (an early employee of the company that would become Dow Jones) sometime in the 1920s, when Gingold was standing by the stock ticker at the brokerage firm that later became Merrill Lynch.

Noticing several trades at $200 or $250 a share or more, he said to Lucien Hooper of stock brokerage W.E. Hutton & Co. that he intended to return to the office to “write about these blue-chip stocks”. It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to high-quality stocks.

References:

JP Morgan Chase Launches Its Own Health Business Unit Three Months After Haven Implodes

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JPMorgan Chase is staking out its own healthcare venture, after its joint project with Berkshire Hathaway and Amazon failed earlier this year. On Thursday, the financial firm announced the launch of Morgan Health, a business unit focused on improving employer-sponsored healthcare, to be led by Dan Mendelson, founder and former CEO of the Washington, D.C.-based healthcare consultancy Avalere Health.

The move comes a little over three months since the joint venture Haven Health, which also aimed to lower employee healthcare costs and boost quality services, said it would be winding down.

Morgan Health will invest up to $250 million in “promising healthcare solutions” and will also enter into strategic partnerships, the company said. The new division, which will be headquartered in Washington, D.C., will also focus on health equity issues.

“JPMorgan Chase has been focused on improving healthcare for its employees for many years,” Morgan Health CEO Mendelson said in a statement. “We are going to take what we’ve learned and accelerate healthcare innovation in the employer-sponsored healthcare market, partnering with and investing in companies that share our goals, and measuring key health outcomes to show what works.”

Mendelson has a background in both health policy and finance. He was an operating partner at healthtech PE firm Welsh Carson for the past two years and served as the associate director for health in the Office of Management and Budget in the Clinton White House prior to founding Avalere. With 165,000 employees in the United States, JPMorgan Chase provides health insurance to around 285,000 people, including dependents.

Haven was announced with much fanfare in 2018, with billionaire Warren Buffet calling rising employee healthcare costs “a hungry tapeworm on the American economy.” Around half of Americans receive healthcare benefits through their employers, according to the Kaiser Family Foundation. The federal government estimates total national healthcare spending reached $3.8 trillion, or $11,582 per person, in 2019. And health spending continues to outpace inflation, growing 4.6% in 2019.

The implosion of Haven three years later demonstrated how even well-capitalized corporate juggernauts could be thwarted by the complexity of the U.S. healthcare system. “We were fighting a tapeworm in the American economy, and the tapeworm won,” Buffet said at Berkshire’s annual shareholder meeting earlier this month, according to Yahoo Finance.

“Haven was supposed to show how creativity, ingenuity and private sector, entrepreneurship could beat the healthcare sector. And it failed,” David Blumenthal, a physician and president of the healthcare think-tank The Commonwealth Fund, told Forbes in an interview earlier this year.

He said the speculation as to one of the big challenges Haven faced was that each company wanted to make its own choices for its employees, which has been the downfall of many similar coalitions. Amazon has also been making its own big push into the healthcare sector recently with a virtual primary care service called Amazon Care, the launch of its wearable Amazon Halo and its purchase of online pharmacy PillPack for $750 million.

The radical change needed to control healthcare costs requires buy-in on many levels, including some that employees might not be happy about, says Blumenthal. It could mean narrower networks of physicians to choose from or requiring travel for certain surgeries so they take place at top-ranked facilities, as opposed to the comfort of a local community hospital.

But the biggest impediments are structural—the lack of purchasing power for employers and consolidation among health systems, he said. “In the end, controlling costs in almost every other Western country is a responsibility that government assumes,” Blumenthal said. “It’s for precisely this reason that the alternatives are not effective.”

Despite what may be an uphill battle ahead, JPMorgan leadership is giving it another go. “Covid has shed light on both the greatness of our healthcare system and its challenges,” Peter Scher, vice chairman of the company who will be overseeing Morgan Health, said in a statement. “The firm has been investing in developing solutions to address social and economic challenges over the past 10 years. We plan to take what we’ve learned there and apply it to healthcare.”

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Katie Jennings

Katie Jennings

I am a staff writer at Forbes covering healthcare, with a focus on digital health and new technologies. I was previously a healthcare reporter for POLITICO covering the European Union from Brussels and the New Jersey Statehouse from Trenton. I have also written for the Los Angeles Times and Business Insider. I was a 2019-2020 Knight-Bagehot Fellow in business and economics reporting at Columbia University. Email me at kjennings@forbes.com or find me on Twitter @katiedjennings.

Source: JP Morgan Chase Launches Its Own Health Business Unit Three Months After Haven Implodes

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References

 

“The History of JPMorgan Chase & Co.: 200 Years of Leadership in Banking, company-published booklet, 2008, p. 5. Predecessor to J.P. Morgan & Co. was Drexel, Morgan & Co., est. 1871. Retrieved July 15, 2010. Other predecessors include Dabney, Morgan & Co. and J.S. Morgan & Co” (PDF).

JPMorgan Says Bitcoin Could Surge to $146,000 in Long Term

JPMorgan Chase & Co. sees Bitcoin as a future competitor of gold as an asset class, with the long-term potential to reach $146,000, Bloomberg reports.

Why It Matters: It would be quite the climb for Bitcoin, which rallied to a record $34,000 before retreating a bit on Monday. But it’s a long way off, if anything. Private investment in Bitcoin would have to grow at a multiple of nearly five to match the investment in gold via ETFs or bars and coins.

But a healthy future for Bitcoin depends on its volatility coming down to gold’s level, encouraging more institutional investment.

  • A group of strategists led by Nikolaos Panigirtzoglou said this could be a “multiyear process.”

Key Numbers (From CoinMarketCap):

  1. Bitcoin’s Market Capitalization: $592 Billion
  2. Bitcoin’s Circulating Supply: 18,600,000 Tokens
  3. Bitcoin’s Current Price (9:00 a.m. ET): $31,701.10

As prices continue to improve and volatility appears to stabilize, more institutions and noted investors are getting involved or expressing interest. But a heated debate over Bitcoin remains:

  • “While some argue that the cryptocurrency offers a hedge against dollar weakness and inflation risk in a world awash with fiscal and monetary stimulus, others say retail investors and trend-following quant funds are pumping up an unsustainable bubble.”

The Future, For Now: JPMorgan anticipates headwinds for the digital currency, with indicators “like a buildup of speculative long positions and an increase in investment wallets holding small amounts of Bitcoin showing potential froth.”

Bitcoin rose 1.7% to $31,567 as of 10:31 a.m. in London. The wider Bloomberg Galaxy Crypto Index added 0.9%. On Monday, Bitcoin slid as much as 17%, the biggest drop since March, after breaching $34,000 for the first time over the weekend. The swings are a reminder of the famed volatility of the largest cryptocurrency, whose price has more than quadrupled over the past year.

Bitcoin has the potential to reach $146,000 in the long term as it competes with gold as an asset class, according to JPMorgan Chase & Co. Bitcoin’s market capitalization of around $575 billion would have to rise by 4.6 times — for a theoretical price of $146,000 — to match the total private sector investment in gold via exchange-traded funds or bars and coins, strategists led by Nikolaos Panigirtzoglou wrote in a note. But that outlook depends on the volatility of Bitcoin converging with that of gold to encourage more institutional investment, a process that will take some time, they said.

“A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term,” the strategists wrote Monday. However, “a convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and is in our mind a multiyear process, according to Bloomberg. This implies that the above-$146,000 theoretical Bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year.”

More institutions and noted investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds into Bitcoin or have said they’re open to doing so. While some argue that the cryptocurrency offers a hedge against dollar weakness and inflation risk in a world awash with fiscal and monetary stimulus, others say retail investors and trend-following quant funds are pumping up an unsustainable bubble.

For now, JPMorgan sees headwinds for the largest cryptocurrency, with indicators like a buildup of speculative long positions and an increase in investment wallets holding small amounts of Bitcoin showing potential froth. “The valuation and position backdrop has become a lot more challenging for Bitcoin at the beginning of the New Year,” the strategists wrote. “While we cannot exclude the possibility that the current speculative mania will propagate further pushing the Bitcoin price up toward the consensus region of between $50,000-$100,000, we believe that such price levels would prove unsustainable.”

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Yahoo Finance

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