Beyond Evergrande, China’s Property Market Faces a $5 Trillion Reckoning

As many economists say China enters what is now the final phase of one of the biggest real-estate booms in history, it is facing a staggering bill: According to economists at Nomura, $ 5 trillion plus loans that developers had taken at a good time. Holdings Inc.

The debt is almost double that at the end of 2016 and last year exceeded the overall economic output of Japan, the world’s third-largest economy.

With warning signs on the debt of nearly two-fifths of growth companies borrowed from international bond investors, global markets are poised for a potential wave of defaults.

Chinese leaders are getting serious about addressing debt by taking a series of steps to curb excessive borrowing. But doing so without hurting the property market, crippling more developers and derailing the country’s economy is turning into one of the biggest economic challenges for Chinese leaders, and one that resonates globally when mismanaged. could.

Luxury Developer Fantasia Holdings Group Co. It failed to pay $206 million in dollar bonds that matured on October 4. In late September, Evergrande, which has more than $300 billion in liabilities, missed two interest-paying deadlines for the bond.

A wave of sell-offs hit Asian junk-bond markets last week. On Friday, bonds of 24 of 59 Chinese growth companies on the ICE BofA Index of Asian Corporate Dollar Bonds were trading at over 20% yields, indicating a high risk of default.

Some potential home buyers are leaning, forcing companies to cut prices to raise cash, and could potentially accelerate their slide if the trend continues.

According to data from CRIC, a research arm of property services firm e-House (China) Enterprise Holdings, overall sales among China’s 100 largest developers were down 36 per cent in September from a year earlier. Ltd.

It revealed that the 10 largest developers, including China Evergrande, Country Garden Holdings Co. and china wenke Co., saw a decline of 44% in sales compared to a year ago.

Economists say most Chinese developers remain relatively healthy. Beijing has the firepower and tighter control of the financial system needed to prevent the so-called Lehman moment, in which a corporate financial crisis snowballs, he says.

In late September, Businesshala reported that China had asked local governments to be prepared for potentially intensifying problems in Evergrande.

But many economists, investors and analysts agree that even for healthy enterprises, the underlying business model—in which developers use credit to fund steady churn of new construction despite the demographic less favorable for new housing—is likely to change. Chances are. Some developers can’t survive the transition, he says.

Of particular concern is some developers’ practice of relying heavily on “presales”, in which buyers pay upfront for still-unfinished apartments.

The practice, more common in China than in the US, means developers are borrowing interest-free from millions of homes, making it easier to continue expanding but potentially leaving buyers without ready-made apartments for developers to fail. needed.

According to China’s National Bureau of Statistics, pre-sales and similar deals were the region’s biggest funding sources since August this year.

“There is no return to the previous growth model for China’s real-estate market,” said Hous Song, a research fellow at the Paulson Institute, a Chicago think tank focused on US-China relations. China is likely to put a set of limits on corporate lending, known as the “three red lines” imposed last year, which helped trigger the recent crisis on some developers, he added. That China can ease some other restrictions.

While Beijing has avoided explicit public statements on its plans to deal with the most indebted developers, many economists believe leaders have no choice but to keep the pressure on them.

Policymakers are determined to reform a model fueled by debt and speculation as part of President Xi Jinping’s broader efforts to mitigate the hidden risks that could destabilize society, especially at key Communist Party meetings next year. before. Mr. Xi is widely expected to break the precedent and extend his rule to a third term.

Economists say Beijing is concerned that after years of rapid home price gains, some may be unable to climb the housing ladder, potentially fueling social discontent, as economists say. The cost of young couples is starting to drop in large cities, making it difficult for them to start a family. According to JPMorgan Asset Management, the median apartment in Beijing or Shenzhen now accounts for more than 40 times the average family’s annual disposable income.

Officials have said they are concerned about the risk posed by the asset market to the financial system. Reinforcing developers’ business models and limiting debt, however, is almost certain to slow investment and cause at least some slowdown in the property market, one of the biggest drivers of China’s growth.

The real estate and construction industries account for a large portion of China’s economy. Researchers Kenneth S. A 2020 paper by Rogoff and Yuanchen Yang estimated that industries, roughly, account for 29% of China’s economic activity, far more than in many other countries. Slow housing growth could spread to other parts of the economy, affecting consumer spending and employment.

Government figures show that about 1.6 million acres of residential floor space were under construction at the end of last year. This was roughly equivalent to 21,000 towers with the floor area of ​​the Burj Khalifa in Dubai, the tallest building in the world.

Housing construction fell by 13.6% in August below its pre-pandemic level, as restrictions on borrowing were imposed last year, calculations by Oxford Economics show.

Local governments’ income from selling land to developers declined by 17.5% in August from a year earlier. Local governments, which are heavily indebted, rely on the sale of land for most of their revenue.

Another slowdown will also risk exposing banks to more bad loans. According to Moody’s Analytics, outstanding property loans—mainly mortgages, but also loans to developers—accounted for 27% of China’s total of $28.8 trillion in bank loans at the end of June.

As pressure on housing mounts, many research houses and banks have cut China’s growth outlook. Oxford Economics on Wednesday lowered its forecast for China’s third-quarter year-on-year GDP growth from 5% to 3.6%. It lowered its 2022 growth forecast for China from 5.8% to 5.4%.

As recently as the 1990s, most city residents in China lived in monotonous residences provided by state-owned employers. When market reforms began to transform the country and more people moved to cities, China needed a massive supply of high-quality apartments. Private developers stepped in.

Over the years, he added millions of new units to modern, streamlined high-rise buildings. In 2019, new homes made up more than three-quarters of home sales in China, less than 12% in the US, according to data cited by Chinese property broker Kei Holdings Inc. in a listing prospectus last year.

In the process, developers grew to be much bigger than anything seen in the US, the largest US home builder by revenue, DR Horton. Inc.,

Reported assets of $21.8 billion at the end of June. Evergrande had about $369 billion. Its assets included vast land reserves and 345,000 unsold parking spaces.

For most of the boom, developers were filling a need. In recent years, policymakers and economists began to worry that much of the market was driven by speculation.

Chinese households are prohibited from investing abroad, and domestic bank deposits provide low returns. Many people are wary of the country’s booming stock markets. So some have poured money into housing, in some cases buying three or four units without the intention of buying or renting them out.

As developers bought more places to build, land sales boosted the national growth figures. Dozens of entrepreneurs who founded growth companies are featured on the list of Chinese billionaires. Ten of the 16 soccer clubs of the Chinese Super League are wholly or partially owned by the developers.

Real-estate giants borrow not only from banks but also from shadow-banking organizations known as trust companies and individuals who invest their savings in investments called wealth-management products. Overseas, they became a mainstay of international junk-bond markets, offering juicy produce to snag deals.

A builder, Kaisa Group Holdings Ltd. , defaulted on its debt in 2015, was still able to borrow and later expand. Two years later it spent the equivalent of $2.1 billion to buy 25 land parcels, and $7.3 billion for land in 2020. This summer, Cassa sold $200 million of short-term bonds with a yield of 8.65%.

By: Quentin Webb & Stella Yifan Xie 

Source: Beyond Evergrande, China’s Property Market Faces a $5 Trillion Reckoning – WSJ

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Corporate Taxes Poised to Rise After 136-Country Deal

 
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Nearly 140 countries agreed Friday to the most sweeping overhaul of global tax rules in a century, a move that aims to curtail tax avoidance by multinational corporations and raise additional tax revenue of as much as $150 billion annually.

But the accord, which is a decade in the making, now must be implemented by the signatories, a path that is likely to be far from smooth, including in a closely divided U.S. Congress.

The reform sets out a global minimum corporate tax of 15%, targeted at preventing companies from exploiting low-tax jurisdictions.

Treasury Secretary Janet Yellen said the floor set by the global minimum tax was a victory for the U.S. and its ability to raise money from companies. She urged Congress to move swiftly to enact the international tax proposals it has been debating, which would help pay for extending the expanded child tax credit and climate-change initiatives, among other policies.

“International tax policy making is a complex issue, but the arcane language of today’s agreement belies how simple and sweeping the stakes are: when this deal is enacted, Americans will find the global economy a much easier place to land a job, earn a living, or scale a business,” Ms. Yellen said.

The agreement among 136 countries also seeks to address the challenges posed by companies, particularly technology giants, that register the intellectual property that drives their profits anywhere in the world. As a result, many of those countries established operations in low-tax countries such as Ireland to reduce their tax bills.

The final deal gained the backing of Ireland, Estonia and Hungary, three members of the European Union that withheld their support for a preliminary agreement in July. But Nigeria, Kenya, Sri Lanka and Pakistan continued to reject the deal.

The new agreement, if implemented, would divide existing tax revenues in a way that favors countries where customers are based. The biggest countries, as well as the low-tax jurisdictions, must implement the agreement in order for it to meaningfully reduce tax avoidance.

Overall, the OECD estimates the new rules could give governments around the world additional revenue of $150 billion annually.

The final deal is expected to receive the backing of leaders from the Group of 20 leading economies when they meet in Rome at the end of this month. Thereafter, the signatories will have to change their national laws and amend international treaties to put the overhaul into practice.

The signatories set 2023 as a target for implementation, which tax experts said was an ambitious goal. And while the agreement would likely survive the failure of a small economy to pass new laws, it would be greatly weakened if a large economy—such as the U.S.—were to fail.

“We are all relying on all the bigger countries being able to move at roughly the same pace together,” said Irish Finance Minister Paschal Donohoe. “Were any big economy not to find itself in a position to implement the agreement,  that would matter for the other countries. But that might not become apparent for a while.”

 

Congress’ work on the deal will be divided into two phases. The first, this year, will be to change the minimum tax on U.S. companies’ foreign income that the U.S. approved in 2017. To comply with the agreement, Democrats intend to raise the rate—the House plan calls for 16.6%—and implement it on a country-by-country basis. Democrats can advance this on their own and they are trying to do so as part of President Biden’s broader policy agenda.

The second phase will be trickier, and the timing is less certain. That is where the U.S. would have to agree to the international deal changing the rules for where income is taxed. Many analysts say that would require a treaty, which would need a two-thirds vote in the Senate and thus some support from Republicans. Ms. Yellen has been more circumspect about the schedule and procedural details of the second phase.

Friction between European countries and the U.S. over the taxation of U.S. tech giants has threatened to trigger a trade war.

In long-running talks about new international tax rules, European officials have argued U.S. tech giants should pay more tax in Europe, and they fought for a system that would reallocate taxing rights on some digital products from countries where the product is produced to where it is consumed.

The U.S., however, resisted. A number of European governments introduced their own taxes on digital services. The U.S. then threatened to respond with new tariffs on imports from Europe.

The compromise was to reallocate taxing rights on all big companies that are above a certain profit threshold.

Under the agreement reached Friday, governments pledged not to introduce any new levies and said they would ultimately withdraw any that are in place. But the timetable for doing that has yet to be settled through bilateral discussions between the U.S. and those countries that have introduced the new levies.

Even though they will likely have to pay more tax after the overhaul, technology companies have long backed efforts to secure an international agreement, which they see as a way to avoid a chaotic network of national levies that threatened to tax the same profit multiple times.

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The Organization for Economic Cooperation and Development, which has been guiding the tax talks, estimates that some $125 billion in existing tax revenues would be divided among countries in a new way.

Those new rules would be applied to companies with global turnover of €20 billion (about $23 billion) or more, and with a profit margin of 10% or more. That group is likely to include around 100 companies. Governments have agreed to reallocate the taxing rights to a quarter of the profits of each of those companies above 10%.

The agreement announced Friday specifies that its revenue and profitability thresholds for reallocating taxing rights could also apply to a part of a larger company if that segment is reported in its financial accounts. Such a provision would apply to Amazon.com Inc.’s cloud division, Amazon Web Services, even though Amazon as a whole isn’t profitable enough to qualify because of its low-margin e-commerce business.

The other part of the agreement sets a minimum tax rate of 15% on the profits made by large companies. Smaller companies, with revenues of less than $750 million, are exempted because they don’t typically have international operations and can’t therefore take advantage of the loopholes that big multinational companies have benefited from.

Low-tax countries such as Ireland will see an overall decline in revenues. Developing countries are least happy with the final deal, having pushed for both a higher minimum tax rate and the reallocation of a greater share of the profits of the largest companies.

 
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6 Phrases That Make You Sound Unqualified In Job Interviews

When you finally land an interview for an exciting role or for a position you think might be out of your league, the main thing you want to do is get through it without blowing it. But surprisingly, so many qualified candidates chip away at their credibility in interviews because of how they present their skills or talk about their experience.

Here are six phrases you should avoid using in your interviews if you don’t want to sound less qualified:

“I know I’m not the most qualified person, but…”

Be wary of saying this, especially if you’re changing careers or applying for a role that’s out of your comfort zone. You may think saying this shows that you’re honest, humble, and honored to be interviewing for the role. But, saying this diminishes your value. If you tell the interviewer you don’t believe you’re qualified for the role, then they’re going to believe you. After all, you know yourself better than they do.

Landing an interview means that the interviewer believes you’re qualified enough, so don’t give them a reason to think otherwise. Instead, highlight the experiences, stories, and projects you’ve worked on that showcase your ability to excel in the role.

“I don’t have much experience with this, but…”

While this one is similar to the previous phrase, you may be tempted to use this if the interviewer inquires about a specific skill. For instance, one of my clients applied for a role that requested experience leading teams. Although she matched everything else and felt confident she’d be successful in the role, she doubted her leadership skills and thought that her years of experience managing a team of three wasn’t enough.

But as I shared with her, words stick, so even if you think you don’t have enough experience in one area, your language still matters. Instead of disqualifying yourself, go straight into the experience and skills you do have. Either show how your experience has prepared you to be an asset or show how your background has equipped you for this new challenge.

Filler words…

You may not even notice that you’re using the words “like” and “um” in your responses, but using filler words while talking about yourself can give the interviewer the impression that you’re not 100% confident about what you’re sharing. It can also chip away at your professionalism and make an interviewer question if you’d speak to clients or other stakeholders the same way if hired.

Of course, when you’re nervous, and your armpits are sweating, it can be hard to make sure those filler words aren’t slipping out. But, one helpful tip is to speak a bit more slowly and pause in between your statements. This will help you catch yourself rather than simply filling the air out of nervousness.

“What does your company do?”

If you don’t already know what the company does before you walk into an interview, then you probably don’t know how to meet their specific needs or solve their problems. This not only makes you come across as unqualified, but it’s also a red flag to the interviewer. Companies want to hire people who are excited about the role and the organization, and not knowing even basic facts about the company shows a lack of genuine interest in the organization.

On top of that, as an interviewee, not doing your research beforehand hinders you from standing out. So, take some time to not only analyze the job description but also read about the company.

“We…” 

Unless you and your team are interviewing for the role, you should not constantly use “we” in your interviews. Often, some corporate professionals fear taking ownership of the projects and initiatives their team accomplished together. But, not owning your individual contribution and saying “we” when describing your accomplishments erodes your experience and qualifications. It can cause the interviewer to question if you can questions

handle the role you’re interviewing for without your team. So, instead of falling back on your team, identify your specific results and the impact you delivered and then highlight that in your interviews with confidence.

Rambling or dancing around a question…

This isn’t a particular phrase, but dancing around a question and rambling can make you seem unsure about your skills and qualifications, even if you know you are qualified for the position. Particularly, when you ramble, you put the responsibility on the interviewer to take away the most important elements of your response. You also risk losing their attention, and the worst outcome is that they won’t care enough to ask again and will move on still unclear about what you can do.

To prevent dancing around a question and rambling, get clear on what you bring to the table before the interview and decide on the skills and stories you want to use to back up what you can do. If you are asked a question that catches you off guard, request clarification and lean into the value and skills you know qualify you for the role.

There are so many ways that qualified candidates disqualify themselves in interviews without even realizing it. Avoiding these phrases will ensure that you don’t sabotage your interviews and will increase your chances of standing out as a top candidate for the roles you desire.

Adunola Adeshola coaches high-achievers on how to take their careers to the next level and secure the positions they’ve been chasing. Grab her free guide.

Adunola Adeshola is a millennial career strategist. Through her signature coaching program, careerREDEFINED, she helps high-achievers navigate their job hunts and secure the positions they’ve been chasing. She also consults companies on how to improve their corporate culture to attract, engage and retain their employees. Along with Forbes, her expertise has been featured in The New York Times, Bloomberg, Fast Company and other publications.

Source: 6 Phrases That Make You Sound Unqualified In Job Interviews

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Bitcoin Has No Value: People Bank’s Of China Official Announces Further Crackdown

Bitcoin (CRYPTO: BTC) and other cryptocurrencies “are not legal tenders and have no actual value support,” according to Deputy Director of the Financial Consumer Rights Protection Bureau of the People’s Bank of China (PBoC) Yin Youping.

What Happened: According to a report by local news outlet People’s Daily Online, Youping said that cryptocurrencies are purely speculative assets. He also advised the public to increase its risk awareness and stay away from the crypto market to “protect their pockets.”

Read also: Crypto’s Biggest Legal Problems

The PBoC official also said in anticipation of the possible crypto market rebound and their related operations in China, the central bank will monitor overseas cryptocurrency exchanges and domestic traders in collaboration with relevant authorities.

What Else: The institution also plans to crack down on the space by blocking crypto trading websites, applications, and corporate channels.

Per the report, PBoC — being a member of the Joint Conference to Deal with Illegal Fund Raising — actively cooperates with the lead department of the China Banking and Insurance Regulatory Commission.

As a result of this collaboration, the regulator created systems aiming for the monitoring, early warning, publicity, education, and overall combating of illegal fundraising powered by cryptocurrencies and blockchains.

Read also: Why Bangladesh will jail Bitcoin traders

Youping explained that PBoC’s next step will be establishing a normalized working mechanism, continue putting high pressure on illegal cryptocurrency-related operations, and continue cracking down on crypto-related transactions.

Lastly, the report intimates that “if the general public finds clues about illegal fund-raising crimes, they must promptly report to the relevant departments.”

By:

Source: Bitcoin Has No Value: People Bank’s Of China Official Announces Further Crackdown

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China’s crackdown on cryptocurrencies will probably intensify and may even lead to an outright ban on holding the tokens, according to Bobby Lee, one of the country’s first Bitcoin moguls.

Lee knows what it’s like to be on the wrong side of Beijing: He sold BTC China, the nation’s first Bitcoin exchange and at one point the second biggest worldwide, in the aftermath of a crackdown in 2017.

China has launched a new campaign against cryptocurrencies this year, taking action against miners and imposing curbs on crypto banking services and trading. The moves have fueled Bitcoin’s drop to about half its mid-April record near $65,000.

“The next thing they could do, the final straw, would be something like banning cryptocurrency altogether,” Lee said in an interview at his office in a WeWork space in downtown Shanghai, without elaborating on how a ban might be enforced. “I put it at the odds of 50-50.”

Lee recently returned to China after spending time in the U.S. and publishing a book, “The Promise of Bitcoin.” He’s now focused on his latest venture, Ballet Global Inc., which produces a hardware wallet that stores cryptocurrencies. Lee is still a Bitcoin bull, predicting it could end this year around $250,000 and reach $1 million by 2025. He declined to disclose his Bitcoin holdings.

Next year will be a bear market cycle. So we’ll see Bitcoin fall back down 50%-80% from the all-time high. I think Bitcoin will have its bull cycle every three or four years in the coming years. I expect Bitcoin to pass a million, two million dollars easily in the next 10-15 years. In fact the next cycle I predict to be in the year 2024 or 2025, and that’s when Bitcoin will cross half a million dollars and might even touch $1 million.

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Can You Beat Inflation With A Monthly Annuity?

A century ago, money from Andrew Carnegie created Teachers Insurance & Annuity Association to pay pensions to schoolteachers, professors and other people who work at nonprofit organizations. In the early days, these pensions were backed by bond portfolios and paid fixed monthly sums. Then, in 1952, TIAA invented the variable annuity.

Payouts from this novel product were tied to the return on a collection of stocks called the College Retirement Equities Fund. Don’t put all your money in this risky thing, a retiring prof would be told, but put in some in order to keep up with the rising cost of living. Your payouts from Cref will be unpredictable but still very likely, over time, to greatly outpace payouts from a fixed annuity. That’s because stocks, over time, outpace bonds.

With the variable annuity, TIAA married the high returns on equities with the classic annuity benefit of longevity pooling. Longevity pooling means that people who die young collect less over their lifetimes than their colleagues who live long. Pooling is a bet worth making because it allows you do live well off a pot of savings without taking a risk that you will exhaust those savings. Pooling is how all monthly pensions work. It’s how Social Security works.

Cref was a hit. It now has $279 billion under management.

Is it a good buy? It looks that way to me. The graph displays the monthly payouts for a 67-year-old female who invested $100,000 25 years ago in the main stock account, which is akin to a global index fund with a 30% foreign allocation. She rode a roller-coaster, with payments cut in half during the crash of 2007-2009, but if she’s still breathing at 92 she’s now getting $2,146 a month, better than triple her $610 starting pension.

For the index fund, the combined fee (for salesmen, annuity administrators and portfolio managers) comes to 0.24% a year. In the world of annuities that counts as a bargain. Variable annuities sold by stockbrokers can cost eight times as much.

It helps that TIAA is a nonprofit and its annuity pools are run on a mutual basis—meaning, pensioners share in the gains and losses that arise from unexpected mortality. Thus, if too few emeritus professors take up skydiving, there will be more than the expected number of mouths to feed and the growth in payouts will be less than hoped for. Conversely, a pandemic boosts payouts.

Now, a mutual form of organization is no guarantee of either efficiency or wisdom, but in this context it means that the insurance company does not have to pad its prices in order to cover the risk that retirees will live too long.

Nor does the nonprofit status mean an advisor won’t be tempted to steer a pensioner into products considerably more costly than an index fund (read this New York Times story). But if you stick to the cheap portfolio options you’ve got a good deal. Proviso: You should be in excellent health if you’re buying any kind of annuity.

Alas, not everyone can get in the door at Cref. You can acquire a TIAA annuity only if you or a fairly close relative works or worked in the nonprofit world—such as for a government agency, hospital, school or college.

What variable annuity is there for retirees in the corporate sector? Nothing that I would recommend. The insurance industry has responded to TIAA’s invention with a slew of convoluted and costly products that make price comparisons next to impossible.

You will probably see some kind of “mortality” charge in the prospectus (that padding I was talking about); you will probably not be able to discern what kind of worse damage is built into the formula that connects your payout to the return on the stock market; your salesman will probably be buying a new sports car right after you sign.

If you are not eligible for TIAA, and if an advisor mentions variable annuities, flee. Find a better solution at Do-It-Yourself Income For Life.

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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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Related Links:

The Future of Work : Utilizing technology to better run your business Tickets, Thu, Jul 29, 2021 at 11:00 AM

Fintech MobiKwik Files DRHP With SEBI To Raise Rs 1,900 Crore

Accelerate Your ETF Strategy | Broadridge

Data Scientist job – JobTripper – Flexible and Remote Job Search

Can the Internet of Things Transform Retail Banking?

Behalf Raises $100+ Million of Funding

New Venture Capital Fund Based In New Zealand Launched By Successful U.S. Tech Executive

New Venture Capital Fund Based in New Zealand Launched by Successful U.S. Tech Executive

Intellectual Property Awareness Network

D. E. Shaw & Co. Inc. Decreases Stock Holdings in Accel Entertainment, Inc. (NYSE:ACEL)

Synopsis of the new CBN regulatory regime for Payment Service Banks – Euro Journal – European News Age

Lloyds Banking Group (LYG) Scheduled to Post Earnings on Thursday

Why Workplace Empathy Won’t Keep Employees Happy

“Empathy is one of the values we’ve had from our founding.” That’s what Chelsea MacDonald, SVP of people and operations at Ada, a tech startup that builds customer-service platforms, told me when we first got on the phone for this story in June. When the company was in its early stages, with about 50 people, empathy was “a bit more ad hoc,” because you could bump into colleagues at lunch. But that was pre-pandemic, and before a hiring surge.

Now, MacDonald says, empathy is built on communication (as many as five times a week, she communicates in some way to the entire company about empathy), through tools (specifically, one that tracks whom people communicate with most and who gets left out), through intimacy (cultivated through special-interest groups) and through transparency (senior leaders share notes after every meeting). At various points in our discussion, MacDonald describes empathy as “more than just, ‘Hey, care about other people’” and “making space for other people to make mistakes.”

She was one of a dozen executives whose communications directors reached out when I tweeted about the office trend of “empathy.” Adriana Bokel Herde, the chief people officer at the software company Pegasystems, told me about the three-hour virtual empathy-training session the company had created for managers—and how nearly 90% had joined voluntarily.

Kieran Snyder, the CEO of Textio, a predictive-writing company, said the biggest surprise about empathy in the workplace is that it and accountability are “flip sides of the same coin.” “We had an engineer give some feedback that was really striking,” she told me. “She said that the most empathetic thing her manager could do for her was be really clear about expectations. Let me be an adult and handle my deliverables so that I know what to do.”

All of these leaders see empathy as a path forward after 17 months of societal and professional tumult. And employees do feel that it’s missing from the workplace: according to the 2021 State of Workplace Empathy Study, administered by software company Businessolver, only 1 in 4 employees believed empathy in their organizations was “sufficient.”

Companies know they must start thinking seriously about addressing their empathy deficit or risk losing workers to companies that are. Still, I’ve also heard from workers who think it’s all nonsense: the latest in a long string of corporate attempts to distract from toxic or exploitative company culture, yet another scenario in which employers implore workers to be honest and vulnerable about their needs, then implicitly or explicitly punish them for it.

If you’ve read all this and are still confused about what workplace empathy actually is, you’re not alone. Outside the office, developing empathy means trying to understand and share the feelings or experiences of someone else. Empathy is different from sympathy, which is more one-directional: you feel sad for what someone else is going through, but you have little understanding of what it feels like. Because empathy is predicated on experience, it’s difficult, if not impossible, to cultivate. At best, it’s expanded sympathy; at worst, it’s trying to force connections between wildly different lived experiences (see especially: white people attempting to empathize with the experience of systemic racism).

Applied in a corporate setting, the very idea of empathy begins to fall apart. Is it bringing their whole selves, to use an HR buzzword, to work? Is it cultivating niceness? Is it making space for sympathy and allowing people to air grievances, or is it leadership modeling vulnerability? Over the course of reporting this story, I talked to more than a dozen people from the C-suites of midsize and large companies that had decided to make empathy central to their corporate messaging or strategy.

Some plans were more fleshed out and self-interrogating. Some thought an empathy training available to three time zones was enough. Others understood empathy as small gestures, like looking at a co-worker’s calendar, seeing they’ve been in meetings all day, and giving them a 10-minute pause to get water before you meet with them.

But where did this current push for workplace empathy begin? According to Johnny C. Taylor Jr., president and chief executive officer of the Society for Human Resource Management (SHRM) and author of the upcoming book Reset: A Leader’s Guide to Work in an Age of Upheaval, it sort of started with, well, him. In the fall of 2020, he’d been hearing a similar refrain from businesses: everyone was tired. Tired of the pandemic; of stalled diversity, equity and inclusion (DE&I) efforts; of their bosses and their employees.

When he looked at the 2020 State of Workplace Empathy Study, then in its fourth year, the reasons for that exhaustion became clear. People were tired because they were working all the time, and trying to sort out caregiving responsibilities, and dealing with oscillating threat levels from COVID-19. But they were also tired, he believed, because there was a generalized empathy deficit.

Read More: Hourly Workers Are Demanding Better Pay and Benefits—and Getting Them

That “empathy deficit” became the cornerstone of Taylor’s State of Society address in November 2020. “Much of the resurgence of DE&I programming in the wake of the George Floyd killing was supposed to encourage open conversation and mutual understanding,” he said. “But it often bypassed empathy. Well-meaning programs devolve into grievance sessions … rather than listening and trying to relate.”

SHRM is an incredibly influential organization, with more than 300,000 members in 165 countries. So while it’s not as if empathy efforts were nonexistent before, Taylor’s speech encouraged them. Even if members weren’t there to listen to his words, his message—and the data from the study—began to filter into HR departments, leaving a trail of optional learning modules and Zoom trainings in its wake.

The backlash started shortly thereafter. Taylor acknowledges as much. “I see these companies jumping on it,” he told me. “But it’s not an initiative. It’s not a buzzword. It’s a cultural principle. If you make this promise, as a company, if you put this word out there, your employees are going to hold you to it.” He adds that empathy should go both ways: “There’s an expectation that employees can mess up; employers should be able to mess up too.”

In the case of employees, many are frustrated by perceived hypocrisy. (All employees who spoke critically about their employers for this story requested anonymity out of concern for their jobs.) One woman told me her company, Viacom, has been doing a lot of messaging about empathy, particularly when it comes to mental health. At the same time, it has switched to a health plan that’s more restrictive when it comes to accessing mental-health professionals and care.

(Viacom attributes the change to a shift in policy on the part of their insurance provider and says it has worked to remedy it.) Other employees report repeated invocations of empathy from upper management in staff meetings, but little training on how to implement it with those they supervise. As one female employee at a performing-arts nonprofit told me, “In a one-on-one meeting with my boss where I was openly struggling and tried to discuss it, I was told that mental health is important, but improving my job performance was more important.”

A customer-service representative for a fintech company said empathy had been centered as a “core value” of the organization: something they were meant to practice with one another but also with customers. To quantify worker empathy, the company sends out customer-satisfaction surveys (CSATs) after each interaction. It found that dips in CSAT scores, which were measured by an automated system, reliably happened when a customer had a long hold time, which had little to do with whether the representative modeled empathy. Yet employees were still promoted based on these scores.

The central tension emerges again and again: “There’s an irony, because there’s the equity that you want to present to employees—while also giving special consideration and solutions for specific situations,” Joyce Kim, the chief marketing officer of Genesys, which provides customer service and call-center tech for businesses, told me. “Those two are often incongruent.”

Put another way, it’s hard, at least from a leadership perspective, to cultivate equal treatment for everyone while also making exceptions for everyone. If you allow an employee to work different hours, have different expectations of accessibility or have more leeway because of an illness, how is that fair to those who don’t need those things? How, in other words, do you accommodate difference while still maximizing profits?

What companies are trying to do, at heart, is train employees to treat one another not like productivity robots, but like people: people with kids, people with responsibilities, people shouldering the weight of systemic discrimination. But that runs counter to the main goal of most companies, which is to create and distribute a product—whether that’s a service, an object or a design—as efficiently as possible. They might dress up that goal in less capitalistic language, but the end point remains the same: profits, the more the better, with as little friction as possible.

Within this framework, the frictionless employee is the ideal employee. But a lack of friction is a privilege. It means looking and acting and behaving like people in power, which, at least in American society, means being white, male and cisgender; with few or no caregiving responsibilities; no physical or mental disabilities; no strong accent or awkward social tics or physical reminders, like “bad teeth,” of growing up poor; and no needs for accommodations—religious, dietary or otherwise. For decades, offices were filled with people who fit this bill, or who were able to hide or groom away the parts of themselves that did not.

The women and people of color who were admitted into these spaces did so with an unspoken caveat that they would make themselves amenable to the status quo. They didn’t bring their “whole selves” to work. Not even close. They brought only the parts that would blend in with the rest of the workforce. If you were sexually harassed, you didn’t make a fuss about it. If someone used a racial slur, same deal. If there were Christmas celebrations that made the one Jewish employee feel weird, that person was expected not to make waves. Bad behavior wasn’t friction, per se. But a worker whose identity already created a form of friction complaining about it? That sure was.

Historians of labor have pointed out that this posture was particularly prevalent in office settings, where salaried workers were often saturated in narratives of a great, unified purpose. If employees took care of the company, and flattened themselves into as close to the image of the ideal worker as possible, the company would take care of them, in compensation and eventual pension. Which is one of many reasons that white collar office workers have been resistant to unionization efforts, which felt, as sociologist C. Wright Mills has noted, like a crass, almost hysterical form of office friction.

Machinists and longshoremen were laborers and had no recourse other than the big stick of the union to advocate for themselves. Office workers could solve conflict man to man, boss to employee, like, well, the white gentlemen that they were—or at the very least pretended to be.

This mindset began to erode over the course of the 1970s, ’80s and ’90s—first, when massive waves of layoffs and benefit cuts destabilized the myth of the benevolent parent company. But the white maleness of the culture also began to (very gradually) shift in the wake of legal protections against discrimination related to gender, age, disability and, only recently, sexual orientation.

White male workers remained dominant in most industries, particularly in leadership roles. But they began to lose their unquestioned monopoly on the norms of the workplace. Some changes were embraced; others, especially around sexual harassment and racial discrimination, were changed via legal force.

Read More: The Pandemic Reset the Balance Between Workers and Employers. How Bosses Respond Will Shape the Future of Work

The overarching goal of HR departments in the past, going back to the field’s origins in “scientific management” of factory assembly lines, was keeping employees healthy enough to work efficiently. After 1964, their task expanded to include compliance with legal protections, in addition to the continued work of keeping employees healthy and “happy” enough to do their work well. “Unhappiness,” after all, is expensive—according to a Gallup estimate from 2013, dissatisfaction costs U.S. companies $450 million to $550 million a year in lost productivity. Unhappiness, in other words, is friction.

But as the workplace continues to diversify, how do you maintain the worker “happiness” of a bunch of different sorts of people, from different backgrounds, with different cultural contexts? There are some obvious fixes: continuing to erode the power of monoculture (in which one, limited way of being/working becomes the way of being/working to which all other employees must aspire); recruiting and retaining managers who actually know how to manage; creating a culture that encourages taking time off. But usually, the proposed solution takes the form of the HR initiative.

Take the 2010s push for “wellness,” which manifested in the form of mental-health seminars, gym memberships and free Fitbits. You can view these initiatives as part of a desire to reduce health-insurance premiums. But you can also see them as a means of confronting the reality of a workforce that, in the wake of the Great Recession, was anxious about their finances and careers, particularly as more and more workers were replaced by subcontractors, who enjoyed even fewer protections and privileges.

Or consider the push for DE&I programs in the wake of Black Lives Matter protests in 2015. These initiatives aim to acknowledge a perceived source of friction—the fact that a company is very white, its leadership remains “snowcapped,” or the workplace is quietly or aggressively hostile to Black and brown employees—while also providing a proposed solution. The corporate DE&I initiative communicates that we see this problem, we’re working to solve it, so you can talk less about it.

Wellness and DE&I initiatives are frequently unsatisfying and demoralizing, particularly for those workers they are ostensibly designed to benefit. They often lean heavily on the labor of those with the least power within an organization. And they approach systemic problems with solutions designed to disrupt people’s lives as little as possible. (A three-hour webinar will not create a culture of inclusion.) But the superficiality is part of the point.

Contain the friction, but do so by creating as little additional friction as possible, because a series of eruptions is easier to contain than a truly paradigm-shifting one that threatens the status quo and, by extension, the company’s public profile and profitability. According to a 2021 SHRM report, in the five years since DE&I initiatives swept the corporate world, 42% of Black employees, 26% of Asian employees and 21% of Hispanic employees reported experiencing unfair treatment based on their race or ethnicity.

The ramifications of racial inequity (lost productivity, turnover and absenteeism) over the past five years may have cost the U.S. up to $172 billion. But instead of acknowledging what it is about the company culture that makes it difficult to retain diverse hires, or what might have to change to recoup those losses, companies blame individual workers who were a “bad fit.” DE&I initiatives don’t fail because there’s a “diversity pipeline problem.” It’s because those in power aren’t willing to relinquish any of it.

A similar contradiction applies to the rise of “corporate empathy.” At its heart, it’s a set of policies, initiatives and messaging developed to respond to the “friction” of a workforce unsettled by the pandemic, a continuing racial reckoning and sustained political anxiety, capped off by an uprising, on a workday, days after most of the workforce had returned from winter breaks. Many empathy initiatives are well-intentioned. But coming from an employer, they still, ultimately, say: We see you are breaking in two, we are too, but how can we collectively still work as if we’re not?

Therein lies the empathy trap. So long as organizations view employees with different needs as sources of friction, and solutions to those needs as examples of unfairness, they will continue to promote and retain employees with the capacity to make their personalities, needs and identities as frictionless as possible. They will encourage “bringing the whole self to work,” but only on a good day. They will fetishize “sharing personal stories,” but only when the ramifications don’t interfere with the product or create interpersonal conflict. This is what happens when you conceive of empathy as allowances: Those who would benefit from it become less desirable workers. Their friction is centered, and their value decreases.

Our society is built around the goals of capitalism—and capitalism, and the ethos of individualism that thrives alongside it, is inherently in conflict with empathy. The qualities that make our bodies, selves and minds most amenable to those goals are prized above all else, and it is HR’s primary task to further cultivate those qualities, whether through “enrichment” or “wellness,” even when the most significant obstacle to either is the workplace itself.

Why do the declarations of empathy feel so hollow? Because growth and profit do not reward it. Companies, HR professionals, managers, even the best trained can do only so much. A large portion of the dissatisfaction that employees feel is the result of actively toxic company policy, thoughtless management and executives clinging to the status quo. But a lot of it, too, is anger at systems that extend beyond the office:

The fraying social safety nets, the decaying social bonds, the frameworks set up to devalue women’s work, the stubborn endurance of racism, the lack of protections or fair pay for the workers whose labor we ostensibly value most. We don’t know how to make people care about other people. No wonder workplace initiatives can feel so laughably incomplete. How do you cultivate a healthy workplace culture when it’s rooted in poisoned soil? “It’s not just a workplace empathy deficit,” Taylor told me. “It’s an American cultural deficit.”

By Anne Helen Petersen

Petersen is co-author of the upcoming book Out of Office: The Big Problem and Bigger Promise of Working From Home

Source: Why Workplace Empathy Won’t Keep Employees Happy | Time

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Contents:

Find out how emotionally intelligent you are by taking our emotional intelligence quiz.

And Mind Tools Premium club members and Corporate users can listen to our exclusive interview with Daniel Goleman

Cynthia D. Fisher; Neal M. Ashkanasy. “The Emerging Role of Emotions in Work Life: An Introduction

Hoffmann, Elizabeth A. (2016). “Emotions and Emotional Labor at Worker-Owned Businesses: Deep Acting, Surface Acting, and Genuine Emotions”. The Sociological Quarterly. 57: 152–173. doi:10.1111/tsq.12113. S2CID 145338476.

McQuerrey, Lisa. “Eight Steps to End Drama in The Workplace”. Retrieved 20 April 2014.

“Interview with Harry Prosen M.D. Psychiatric Consultant Bonobo Species Survival Plan”. Retrieved 11 August 2011.

Rosenberg, Marshall B. (2005). “5: Connecting with others empathically”. Speak peace in a world of conflict: what you say next will change your world. Puddledancer Press. pp. 240. ISBN 978-1892005175.

Empathy Definitions by Edwin Rutsch from the Center for Building a Culture of Empathy.

Mirrored emotion by Jean Decety from the University of Chicago.

Empathy and the brain by Gwen Dewar published in Parenting Science.

Empathic listening skills How to listen so others will feel heard, or listening first aid (University of California).

Study: People literally feel pain of others – mirror-touch synesthesia Live Science, 17 June 2007.

Retail Sales For June Provide An Early Boost, But Bond Yields Mostly Calling The Shots

Getty Images

The first week of earnings season wraps up with major indices closely tracking the bond market in Wall Street’s version of “follow the leader.” Earnings absolutely matter, but right now the Fed’s policies are maybe a bigger influence. In the short-term the Fed is still the girl everyone wants to dance with.

Lately, you can almost guess where stocks are going just by checking the 10-year Treasury yield, which often moves on perceptions of what the Fed might have up its sleeve. The yield bounced back from lows this morning to around 1.32%, and stock indices climbed a bit in pre-market trading. That was a switch from yesterday when yields fell and stocks followed suit. Still, yields are down about six basis points since Monday, and stocks are also facing a losing week.

It’s unclear how long this close tracking of yields might last, but maybe a big flood of earnings due next week could give stocks a chance to act more on fundamental corporate news instead of the back and forth in fixed income. Meanwhile, retail sales for June this morning basically blew Wall Street’s conservative estimates out of the water, and stock indices edged up in pre-market trading after the data.

Headline retail sales rose 0.6% compared with the consensus expectation for a 0.6% decline, and with automobiles stripped out, the report looked even stronger, up 1.3% vs. expectations for 0.3%. Those numbers are incredibly strong and show the difficulty analysts are having in this market. The estimates missed consumer strength by a long shot. However, it’s also possible this is a blip in the data that might get smoothed out with July’s numbers. We’ll have to wait and see.

Caution Flag Keeps Waving

Yesterday continued what feels like a “risk-off” pattern that began taking hold earlier in the week, but this time Tech got caught up in the selling, too. In fact, Tech was the second-worst performing sector of the day behind Energy, which continues to tank on ideas more crude could flow soon thanks to OPEC’s agreement.

We already saw investors embracing fixed income and “defensive” sectors starting Tuesday, and Thursday continued the trend. When your leading sectors are Utilities, Staples, Real Estate, the way they were yesterday, that really suggests the surging bond market’s message to stocks is getting read loudly and clearly.

This week’s decline in rates also isn’t necessarily happy news for Financial companies. That being said, the Financials fared pretty well yesterday, with some of them coming back after an early drop. It was an impressive performance and we’ll see if it can spill over into Friday.

Energy helped fuel the rally earlier this year, but it’s struggling under the weight of falling crude prices. Softness in crude isn’t guaranteed to last—and prices of $70 a barrel aren’t historically cheap—but crude’s inability to consistently hold $75 speaks a lot. Technically, the strength just seems to fade up there. Crude is up slightly this morning but still below $72 a barrel.

Losing Steam?

All of the FAANGs lost ground yesterday after a nice rally earlier in the week. Another key Tech name, chipmaker Nvidia (NVDA), got taken to the cleaners with a 4.4% decline despite a major analyst price target increase to $900. NVDA has been on an incredible roll most of the year.

This week’s unexpectedly strong June inflation readings might be sending some investors into “flight for safety” mode, though no investment is ever truly “safe.” Fed Chairman Jerome Powell sounded dovish in his congressional testimony Wednesday and Thursday, but even Powell admitted he hadn’t expected to see inflation move this much above the Fed’s 2% target.

Keeping things in perspective, consider that the S&P 500 Index (SPX) did power back late Thursday to close well off its lows. That’s often a sign of people “buying the dip,” as the saying goes. Dip-buying has been a feature all year, and with bond yields so low and the money supply so huge, it’s hard to argue that cash on the sidelines won’t keep being injected if stocks decline.

Two popular stocks that data show have been popular with TD Ameritrade clients are Apple (AAPL) and Microsoft (MSFT), and both of them have regularly benefited from this “dip buying” trend. Neither lost much ground yesterday, so if they start to rise today, consider whether it reflects a broader move where investors come back in after weakness. However, one day is never a trend.

Reopening stocks (the ones tied closely to the economy’s reopening like airlines and restaurants) are doing a bit better in pre-market trading today after getting hit hard yesterday.

In other corporate news today, vaccine stocks climbed after Moderna (MRNA) was added to the S&P 500. BioNTech (BNTX), which is Pfizer’s (PFE) vaccine partner, is also higher. MRNA rose 7% in pre-market trading.

Strap In: Big Earnings Week Ahead

Earnings action dies down a bit here before getting back to full speed next week. Netflix (NFLX), American Express (AXP), Johnson & Johnson (JNJ), United Airlines (UAL), AT&T (T), Verizon (VZ), American Airlines (AAL) and Coca-Cola (KO) are high-profile companies expected to open their books in the week ahead.

It could be interesting to hear from the airlines about how the global reopening is going. Delta (DAL) surprised with an earnings beat this week, but also expressed concerns about high fuel prices. While vaccine rollouts in the U.S. have helped open travel back up, other parts of the globe aren’t faring as well. And worries about the Delta variant of Covid don’t seem to be helping things.

Beyond the numbers that UAL and AAL report next week, the market may be looking for guidance from their executives about the state of global travel as a proxy for economic health. DAL said travel seems to be coming back faster than expected. Will other airlines see it the same way? Earnings are one way to possibly find out.Even with the Delta variant of Covid gaining steam, there’s no doubt that at least in the U.S, the crowds are back for sporting events.

For example, the baseball All-Star Game this week was packed. Big events like that could be good news for KO when it reports earnings. PepsiCo (PEP) already reported a nice quarter. We’ll see if KO can follow up, and whether its executives will say anything about rising producer prices nipping at the heels of consumer products companies.

Confidence Game: The 10-year Treasury yield sank below 1.3% for a while Thursday but popped back to that level by the end of the day. It’s now down sharply from highs earlier this week. Strength in fixed income—yields fall as Treasury prices climb—often suggests lack of confidence in economic growth.

Why are people apparently hesitant at this juncture? It could be as simple as a lack of catalysts with the market now at record highs. Yes, bank earnings were mostly strong, but Financial stocks were already one of the best sectors year-to-date, so good earnings might have become an excuse for some investors to take profit. Also, with earnings expectations so high in general, it takes a really big beat for a company to impress.

Covid Conundrum: Anyone watching the news lately probably sees numerous reports about how the Delta variant of Covid has taken off in the U.S. and case counts are up across almost every state. While the human toll of this virus surge is certainly nothing to dismiss, for the market it seems like a bit of an afterthought, at least so far. It could be because so many of the new cases are in less populated parts of the country, which can make it seem like a faraway issue for those of us in big cities. Or it could be because so many of us are vaccinated and feel like we have some protection.

But the other factor is numbers-related. When you hear reports on the news about Covid cases rising 50%, consider what that means. To use a baseball analogy, if a hitter raises his batting average from .050 to .100, he’s still not going to get into the lineup regularly because his average is just too low. Covid cases sank to incredibly light levels in June down near 11,000 a day, which means a 50% rise isn’t really too huge in terms of raw numbers and is less than 10% of the peaks from last winter. We’ll be keeping an eye on Covid, especially as overseas economies continue to be on lockdowns and variants could cause more problems even here. But at least for now, the market doesn’t seem too concerned.

Dull Roar: Most jobs that put you regularly on live television in front of millions of viewers require you to be entertaining. One exception to that rule is the position held by Fed Chairman Jerome Powell. It’s actually his job to be uninteresting, and he’s arguably very good at it. His testimony in front of the Senate Banking Committee on Thursday was another example, with the Fed chair staying collected even as senators from both sides of the aisle gave him their opinions on what the Fed should or shouldn’t do. The closely monitored 10-year Treasury yield stayed anchored near 1.33% as he spoke.

Even if Powell keeps up the dovishness, you can’t rule out Treasury yields perhaps starting to rise in coming months if inflation readings continue hot and investors start to lose faith in the Fed making the right call at the right time. Eventually people might start to demand higher premiums for taking on the risk of buying bonds. The Fed itself, however, could have something to say about that.

It’s been sopping up so much of the paper lately that market demand doesn’t give you the same kind of impact it might have once had. That’s an argument for bond prices continuing to show firmness and yields to stay under pressure, as we’ve seen the last few months. Powell, for his part, showed no signs of being in a hurry yesterday to lift any of the stimulus.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

Follow me on Twitter.

I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.

Source: Retail Sales For June Provide An Early Boost, But Bond Yields Mostly Calling The Shots

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Critics:

Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit. Retailers satisfy demand identified through a supply chain. The term “retailer” is typically applied where a service provider fills the small orders of many individuals, who are end-users, rather than large orders of a small number of wholesale, corporate or government clientele. Shopping generally refers to the act of buying products.

Sometimes this is done to obtain final goods, including necessities such as food and clothing; sometimes it takes place as a recreational activity. Recreational shopping often involves window shopping and browsing: it does not always result in a purchase.

Most modern retailers typically make a variety of strategic level decisions including the type of store, the market to be served, the optimal product assortment, customer service, supporting services and the store’s overall market positioning. Once the strategic retail plan is in place, retailers devise the retail mix which includes product, price, place, promotion, personnel, and presentation.

In the digital age, an increasing number of retailers are seeking to reach broader markets by selling through multiple channels, including both bricks and mortar and online retailing. Digital technologies are also changing the way that consumers pay for goods and services. Retailing support services may also include the provision of credit, delivery services, advisory services, stylist services and a range of other supporting services.

Retail shops occur in a diverse range of types of and in many different contexts – from strip shopping centres in residential streets through to large, indoor shopping malls. Shopping streets may restrict traffic to pedestrians only. Sometimes a shopping street has a partial or full roof to create a more comfortable shopping environment – protecting customers from various types of weather conditions such as extreme temperatures, winds or precipitation. Forms of non-shop retailing include online retailing (a type of electronic-commerce used for business-to-consumer (B2C) transactions) and mail order

How Investing in Strategic Partnerships Can Help Grow Your Business

How Investing in Strategic Partnerships Can Help Grow Your Business

The best entrepreneurs understand the power of people. Whether thinking about accessible healthcare or, more broadly, startup success, collaboration and partnerships have always been vital, even before the pandemic strengthened the need for a collective approach.

Of course, for entrepreneurs looking to scale their business, cash is a critical piece of the puzzle. For obvious reasons, access to capital enables a business to grow, whether that’s investing in research and development (R&D), expanding overseas, or hiring top talent.

But capital shouldn’t be treated as a silver bullet. Instead, founders should turn their attention toward creating strong, strategic partnerships to drive business growth. Working with other established organisations builds credibility, allowing businesses to make further connections and expand their operations.

Entrepreneurs, though, should learn exactly how to unlock beneficial relationships that will ultimately set them up for long-term victory. Partnerships must be win-win and goals aligned so that everyone comes out as beneficiaries.

Why connections matter.

When executed wisely, strategic partnerships can foster business growth. With the potential to form a critical part of any growing business, these partnerships benefit startups and corporates alike. For large corporations, startups and scaleups can fuel innovation; for early-stage founders, big companies can enable fresh revenue, scaling possibilities and credibility.

With established partners come established networks. Existing knowledge, suppliers and customers can make selling products on a larger scale much easier to achieve. This empowers startups to scale quickly, with that revenue used to reinvest in operations and innovation, fuelling further growth and making it easier to establish new business relationships with a wider pool of organisations.

What’s also important, particularly if operating in a crowded space such as healthcare, is the potential for impact. Healthcare solutions – rightly or wrongly – are often judged by the number of patients using them. So, establishing key strategic partnerships – as we’ve done with Microsoft, Allianz and Portuguese healthcare provider Médis – provides an avenue to millions of patients.

Infermedica experimented with different business models, but eventually settled on a B2B strategy over B2C as we had the potential to reach more patients through a partnership network. This accelerated on our goal to bring more accessible healthcare to all. Strategic partnerships enable startups to quickly build credibility and cut through loud crowded markets.

Investor partnerships can play a role as well. Relationships don’t need to simply need to be between providers, but investors can bring knowledge, connections and consultancy which can help startups to overcome growing challenges and open doors that may otherwise remain closed until certain milestones around size, revenue and customers have been reached. What’s key is ensuring both sides remain committed to moving forward together.

How to unlock the opportunity.

But what’s the best way to go about creating these relationships? For founders, the first step to achieving this is to remember that although partnerships are sealed between companies, they’re created by people and that human connection has to be built first. Talk to the potential partner to understand what they are truly trying to achieve and how a partnership could help them solve it.

Similarly, founders must understand their own goals and what they need from any relationship to ensure they keep progressing towards it. When discussions are open and the people are looked after, great relationships are forged.

Developing a partner program at an early stage: creating a network of trusted resellers and innovative partners also allows entrepreneurs to explore opportunities in their immediate area and beyond. Indeed, European founders shouldn’t simply look within their own country or continent for partnerships, by looking further afield they open themselves up to new ways of thinking and opportunities.

Partner programs and ecosystems establish a feedback community, each organization provides feedback which improves each other’s offerings, leading to greater growth and credibility for all. This also drives thoughts around integration, how compatible one offering is with another to ensure it truly adds value in a real-world environment. Collaboration with partners enables entrepreneurs to see how their product fits into the bigger picture which fuels wider innovation.

For example, Infermedica’s partner program enables organizations from all aspects of healthcare to collaborate with us and access our AI technology, enhancing and diversifying services which offer better end-user outcomes. Of course, there is still some way to go and things will never stop evolving. The top SaaS companies have on average around 350 integrations as they understand all of the potential engagement points and are establishing ecosystems that reflect them. The key takeaway: when creating partner ecosystems, always keep in mind how an end-user could potentially interact with your offering.

Take your time.

As in life, building a long-last relationship takes a lot of time and effort. So, while it can be tempting to rush into an exciting partnership or program, it’s vital to take your time to build trust and establish clear boundaries. Drawing on our own experience, it took more than a year to establish partnerships with Microsoft and Allianz, and it’s an ongoing process of building mutual trust and finding new ways to collaborate.

Remember that there should be no A and B side in partnerships. Each party brings their own benefits to the table. Combining knowledge and resources makes the relationship greater than the sum of its parts, delivering greater value to customers, industry and economy.

At all times, specificity is key to success. Be sure that the partnership is truly feeding into your overall strategy and that you have all the necessary resources to support you on your journey. Plan it well and take your time. It’s a long-term strategy that requires patience, commitment and perseverance. Rome was not built in a day, but the foundations of a long lasting relationship could start tomorrow.

Keep your goals in mind and ensure you’re going into every conversation with completely open eyes because when you find those strategic connections that just work, the opportunity for growth is truly great.

By: Tomasz Domino / Chief Operating Officer, Infermedica

Source: How Investing in Strategic Partnerships Can Help Grow Your Business

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Critics:

A strategic partnership (also see strategic alliance) is a relationship between two commercial enterprises, usually formalized by one or more business contracts. A strategic partnership will usually fall short of a legal partnership entity, agency, or corporate affiliate relationship. Strategic partnerships can take on various forms from shake hand agreements, contractual cooperation’s all the way to equity alliances, either the formation of a joint venture or cross-holdings in each other.

Typically, two companies form a strategic partnership when each possesses one or more business assets or have expertise that will help the other by enhancing their businesses. This can also mean, that one firm is helping the other firm to expand their market to other marketplaces, by helping with some expertise.

According to Cohen and Levinthal a considerable in-house expertise which complements the technology activities of its partner is a necessary condition for a successful exploitation of knowledge and technological capabilities outside their boundaries. Strategic partnerships can develop in outsourcing relationships where the parties desire to achieve long-term “win-win” benefits and innovation based on mutually desired outcomes.

No matter if a business contract was signed, between the two parties, or not, a trust-based relationship between the partners is indispensable. One common strategic partnership involves one company providing engineering, manufacturing or product development services, partnering with a smaller, entrepreneurial firm or inventor to create a specialized new product. Typically, the larger firm supplies capital, and the necessary product development, marketing, manufacturing, and distribution capabilities, while the smaller firm supplies specialized technical or creative expertise.

References

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