Author: openjargon

• Peloton was a Wall Street darling during the pandemic, with a market cap of around $50 billion.
• Now, its CEO is out after two years, it announced more layoffs, and its stock hit a record low.
• Here is the history of Peloton's impressive rise and fall in recent years.

At the height of the pandemic, Peloton was on top of the world.

Its stock pushed $171 per share and its market cap hovered around $50 billion.

On Thursday, the company announced its CEO was out and its stock was trading below $3 — a record low.

The company has struggled since the pandemic boom and falling demand for its products. In 2022, the company laid off more than 5,000 staff members, saw four top executives depart, and reportedly considered a potential sale to the likes of Amazon, Apple, or Nike. The company has also seen mass layoffs and recalled millions of bikes.

It's a stunning reversal for a company once at the top of the connected-fitness food chain, and it's the result of a culmination of factors, including the fading popularity of at-home fitness and a mishandled logistics operation. 

Now, to re-energize its business, the company is focused on pushing beyond the at-home fitness market. It is incentivizing businesses to offer Peloton as a workplace benefit and adding Peloton equipment to local gyms, apartments, and hotels, Bloomberg reported. 

Here's how Peloton got its start and became a fitness world darling, and just as quickly saw its decline.

Peloton was founded in 2012 by a group of ex-IAC employees

John Foley, Hisao Kushi, Tom Cortese, and Graham Stanton — four of Peloton's five cofounders — met working at media and internet company IAC. The fifth cofounder, Yony Feng, met the group through his roommate who worked at IAC. 

Foley has said that the vision for the company was his, but that his four cofounders "took it, ran with it, and built it while I was gone" raising money, he told Fortune in 2021.

Prior to founding Peloton, Foley was president at Barnes & Noble, overseeing its e-commerce business. 

The early version of its bike was 'janky,' and it struggled to find investors

Foley is a self-professed "boutique fitness addict," as well as an avid cyclist. But the early versions of the Peloton bike didn't look like something you'd find in a high-end fitness studio, the company's first instructor, Jenn Sherman, told Fortune. 

"They had this little tiny corner of the office that was sectioned off by black velvet curtains. There was a camera on a tripod sticking through a circle people literally cut out of the curtain. There was a janky, broken bike in there — the instructor bike was like this rusted piece of crap. It was ridiculous," she said. 

Still, Sherman signed on. Meanwhile, Foley was on the road for the first three years, pitching what he told Business Insider in 2018 was as many as 400 investors. 

"I got 400 'nos,'" he said at the time. "The worst part is that we're not talking about 400 individual pitches. A lot of people would want me to come back four or five times and have me meet more partners and pitch again. I would say that I've been turned down maybe five or six thousand times."

Still, the company scraped together funding from more than 200 angel investors and put its first bike on Kickstarter in 2013 for an "early bird" price of $1,500.

Peloton quickly developed a cult following

Peloton began shipping bikes in 2014, with Foley and the other cofounders showing off how they worked at pop-up stores inside shopping centers.

But it didn't take long for the company to develop a cult following, thanks in large part to its roster of high-wattage instructors. When the company opened its own studio in New York City, owners of the company's $2,000 bike would make a pilgrimage to Manhattan in order to take a live class with their favorite instructor. 

Eventually, big-name investors came calling. "I would say that it took about five years for the really smart money to start getting involved," Foley told BI in 2018. "When Mary Meeker is calling you to say, 'Hey, I want to invest' — that's pretty cool."

That year, Peloton raised $550 million in venture capital funding at a valuation of $4.1 billion, according to Pitchbook. 

Peloton expanded its offerings as spinning faded in popularity

Peloton introduced its second product, a $4,000 treadmill called the Peloton Tread, in 2018, and added new types of classes, like high-intensity interval training and yoga, to keep users engaged or get new customers to sign onto a digital subscription, no equipment required. 

By 2019, the company had sold 577,000 bikes and treadmills. 

In August of that year, Peloton filed for an initial public offering, revealing it had over 500,000 paying subscribers, but also spiraling losses from major investments in marketing and licensing music for its classes. 

Peloton went public on September 26, 2019 in what was at the time the third-worst trading debut for a major IPO since the financial crisis.

Peloton's stock plummeted following its 2019 holiday ad

Ahead of the holidays in 2019, Peloton made what was seen as a major public misstep with its infamous "Peloton wife" ad. 

The ad, featuring a woman whose husband gifts her a Peloton bike for Christmas, was viewed as being sexist and playing into outdated standards of beauty. Public outrage over the ad sent Peloton's stock plunging 9%, wiping out $942 million in market value in a single day. 

But Peloton stood by the commercial, issuing a statement saying it was "disappointed" by how people had "misinterpreted" the ad. 

The pandemic became a major boon for Peloton's business

Then, in early 2020, the pandemic hit. Suddenly stuck inside, people turned to at-home fitness and found connection in Peloton's streamed workout classes. The company's share price took off. 

By May 2020, Peloton reported a 66% increase in sales and a 94% increase in subscribers. In September of that year, Peloton said that it had had its first profitable quarter, with sales spiking 172% since the same quarter the year prior and revenue rising to $607 million. 

But the unexpected uptick in demand showed the cracks in Peloton's logistics operation. Delivery times for new equipment became longer and longer, and Peloton's typically diehard fans began expressing their frustration online. 

Then, some customers began experiencing issues with their bikes where pedals snapped off mid-ride. The company took weeks or months to make repairs, further frustrating users. After 120 reports of bikes breaking and 16 reports of customers getting injured, the company issued a recall affecting 30,000 bikes. 

Still, 2020 was all around a stellar year for Peloton that included debuting new, higher-end versions of the bike and treadmill and inking a multi-year deal with Beyoncé. A year after the "Peloton wife" ad, the company's market value had hit $34 billion. 

In early 2021, Peloton reported its first-ever billion-dollar quarter, driven by holiday sales and sustained demand for at-home fitness as the pandemic raged on. Foley pledged to manufacture "tens of millions" of treadmills and bikes to keep up with surging sales and spend $100 million to speed up deliveries hampered by port congestion. 

Peloton had to issue a treadmill recall following a child's death

But in March 2021, tragedy struck when a child was fatally injured in an accident with a Peloton treadmill. Shares dipped 4% following the news and regulators urged a recall.

Foley initially pushed back, calling the warnings "inaccurate and misleading," but by that May, the company announced a recall of the higher-end Tread+. 

In an effort to make the treadmill safer, Peloton also made a change that resulted in it becoming unusable unless users paid $39 per month. Following customer outrage, the company said it would work on a fix. 

As the pandemic began to recede, so did Peloton's popularity

As the nation continued to move toward reopening — and returning to the gym and fitness studios — Peloton's business took a punch. The company's stock dropped 34% following its fiscal first-quarter earnings in November, which included a dismal outlook for the months ahead.  

"It is clear that we underestimated the reopening impact on our company and the overall industry," Foley said in a call with shareholders.

Peloton was also being chased by rivals like Echelon and iFit Health, which offer similar, cheaper products. Peloton filed a lawsuit against them in November 2021, accusing them of patent infringement. 

In the meantime, Peloton had been taking reputational hits. A hiring freeze set in, and Black employees voiced concerns over their pay compared with the industry standard. A character in the "Sex and the City" reboot died after using his bike, and then the same thing happened to a "Billions"character soon after. And in December, Foley threw a lavish holiday party as the company's stock tanked. 

By January 2022, the company was discussing layoffs, reportedly pausing production of new equipment, and halting plans to open a new $400 million factory. Employees told BI the company's warehouses were filled with excess bikes. 

Peloton began laying off employees, replaced Foley, and eyed a potential acquisition

In February 2022, The Wall Street Journal reported that Amazon was eyeing Peloton as a potential acquisition — soon after, the Financial Times reported that Nike was considering the same. Wall Street analysts posited that Apple would be another natural fit as the new owner of Peloton. 

Days later, Foley announced that he would step down as Peloton's CEO and that the company was slashing 2,800 jobs, about 20% of its workforce. The company said that the fired employees would receive a free year's subscription to the platform, along with a "meaningful cash severance allotment" and other benefits. Its roster of instructors would not be impacted by the layoffs.

During a conference call following the company's second-quarter earnings, Foley said he took responsibility for what happened at Peloton. 

"We've made missteps along the way. To meet market demand, we scaled our operations too rapidly. And we overinvested in certain areas of our business," he said. 

"We own this. I own this. And we're holding ourselves accountable," he added.

Experts told BI that the company fell prey to the "bullwhip effect," spending big on logistics while expecting that demand would remain high — when demand cooled, Peloton was left with costly supply chain operations that now require a major overhaul. 

Barry McCarthy, the former chief financial officer of Spotify and Netflix, replaced Foley as CEO. In a leaked memo to employees, McCarthy called the layoffs "a bitter pill" but said that the company needed to accept "the world as it is, not as we want it to be if we're going to be successful."

"Now that the reset button has been pushed, the challenge ahead of us is this…… do we squander the opportunity in front of us or do we engineer the great comeback story of the post-Covid era?" he wrote. "I'm here for the comeback story."

Foley severed his remaining ties to the company

July 2022 brought news of 570 additional job cuts, and that August, the company announced yet another round of layoffs, slashing roughly 800 customer-service and distribution team members — and raising prices on some equipment. 

In September of that year, Foley stepped down as executive chairman. Cofounder and Chief Legal Officer Hisao Kushi and Chief Commercial Officer Kevin Cornils also left the company.

In a statement, Foley said: "Now it is time for me to start a new professional chapter. I have passion for building companies and creating great teams, and I am excited to do that again in a new space. I am leaving the company in good hands." Lead independent director Karen Boone took over as chair. 

Then came the departure of another top executive: The New York Times' DealBook newsletter reported that Chief Marketing Officer Dara Treseder would exit the company that October. Treseder was instrumental in helping Peloton double its membership, which numbered more than 6.9 million at the time, a company spokesperson told DealBook.

Peloton made another round of cuts in October 2022, but McCarthy said he's 'optimistic about our future'

McCarthy told The Wall Street Journal in October 2022 that the company would cut an additional 500 employees, many of whom work on the marketing team, in an effort to cut costs. 

The report revealed that Peloton had eliminated more jobs than was previously known. About 600 additional employees had left the company since June through factors like retail store closings and attrition. That brought Peloton's total cuts for the year to over 5,200. 

The Journal also reported that McCarthy said the company had only six months to turn things around, which McCarthy later denied in a memo to employees published by Bloomberg. McCarthy said his comments were taken out of context and that he's never felt more optimistic about the company's future. 

"There is no ticking clock on our performance and even if there was, the business is performing well and making steady progress toward our year-end goal of break-even cash flow," he said. 

Peloton has indeed made several changes since last summer that could help re-energize sales: it launched its long-awaited rowing machine, started selling its gear on Amazon, and inked new deals with Dick's Sporting Goods and Hilton in hopes of attracting new customers. 

But 2023 was rough for the company

Peloton's 2023 wasn't a great cause for optimism so far, though.

That May, Peloton reported a wider-than-expected loss of 79 cents per share for the most recent quarter, and it projected its first-ever decline in subscribers.

And in a shareholder letter, McCarthy said the upcoming quarter "will be among our most challenging from a growth perspective."

And things got worse as the company had to issue a massive recall

The New York-based company announced in May 2023 that, in cooperation with the US Consumer Product Safety Commission, it was doing a voluntary recall of the Peloton original Bike sold from January 2018 to May 2023 in the US for about $1,400. Per the company, "the seat post can break unexpectedly during use, creating a potential fall and injury risk." Peloton said that as of April 30, 2023, it had identified 35 reports of seat posts breaking, out of more than 2.1 million units sold.

According to the US Consumer Product and Safety Commission, there were more than a dozen reports of injuries – including a fractured wrist, lacerations, and bruises – caused by seat posts suddenly breaking.

The recall does not impact Peloton Bike+ members nor Peloton original Bike owners in the UK, Germany, and Australia, according to the company.

Peloton now wants to be a workplace benefit for employees

Peloton is working to expand its reach beyond the at-home fitness market. The company is focused on building partnerships with businesses, including hotels, apartments, gyms, as well as education and healthcare facilities, to offer its services and equipment, Bloomberg reported.

Employees at participating businesses will receive discounts on Peloton equipment and free use of the Peloton app, which typically costs customers $24 per month and doesn't need to be used with Peloton equipment.

Peloton's next hurdle is another CEO departure and more layoffs

Peloton announced in May 2024 that CEO Barry McCarthy would be stepping down and that it's laying off around 400 workers, or roughly 15% of its total workforce.

The layoffs are part of restructuring efforts to reduce yearly expenses by more than $200 million by the end of the 2025 fiscal year, the company said. As part of these efforts, the company will also be reducing its retail showroom footprint and rethinking its international approach.

Karen Boone, the chair of Peloton's board, and Chris Bruzzo, one of its directors, will serve as interim co-CEOs. The board has already begun looking for its next CEO, the company says.

Peloton's stock was trading below $3 — a record low — following the news.

from All Content from Business Insider https://ift.tt/OuNePnA
via IFTTT

• As organizations embark on a journey toward growth, their equity requirements change.
• To drive a culture of ownership, companies must build an effective strategy around equity management. 
• Here are a few considerations organizational leaders can keep in mind as their company evolves. 

As a private company grows from early-stage startup to IPO and beyond, the equity requirements of the business and its shareholders evolve. To address these changing needs, companies must consider how to design an effective equity management strategy that tracks ownership across the capitalization table, supports the creation of competitive stock plan strategies, clearly communicates equity value to employees, and helps foster company growth — all while remaining compliant with securities laws and tax regulations.

Below are four foundational steps organizations can take as they build an effective modern equity management strategy — one that supports a robust culture of ownership and helps organizational leaders prepare for the next growth stage.

1. Optimize capitalization table management

One of the core elements of an effective equity management strategy is a transparent and defensible capitalization table. Cap tables are documents that track ownership structures within a company. They contain essential information about who owns specific shares, vesting schedules, and other important details. They can also serve as critical financial tools that forecast equity dilution (the decrease in existing shareholders' ownership percentages) or the impact of future investment rounds.

"Companies should look at the long-term impact of their equity programs," said Teri McFadden, principal of talent at Norwest Venture Partners. "Tracking equity and forecasting future needs across new hire, promotion, and retention equity grants becomes critical to business planning and overall equity dilution."

A successful cap table management strategy also depends on strong data integrity. For example, an inaccurate data point can lead to incorrect equity forecasting, costly errors during financial audits, or delays ahead of a future equity transaction. These issues may compound as a company grows and moves closer to an IPO. 

To enhance your cap table data strategy, consider migrating to a more sophisticated software solution once you've reached the growth stage (Series B+). With a scalable approach to equity cap table management, companies can continue to adapt to address more complex transaction needs as they arise.

2. Get the 409A valuation right

 A 409A valuation is an independent appraisal process used to establish the strike price for newly granted stock options. This valuation factors into a number of considerations, including repricing and tax implications.  

Finding an experienced partner can help companies comply with securities laws and remain transaction-ready ahead of a liquidity event, fundraising, or IPO. 

For startups that have deferred their private-to-public plans, consider that 409A valuations and related activities within three years of an IPO are subject to public disclosure. So, while current market conditions are rife with volatility, it's important to think ahead and proactively plan for those events.

3. Prepare for one-off or recurring liquidity events

According to recent research from Morgan Stanley at Work, 59% of private company decision-makers reported increased internal pressure to conduct a liquidity event — an acquisition, merger, or other circumstance that allows shareholders to cash out some or all of their shares. As a result, more companies offer organized liquidity events that reward shareholders with partial or full liquidity for their vested shares. 

These organized events have become a common method for companies to grant liquidity to shareholders. However, such transactions require adequate preparation, shareholder communication, and education. 

For companies looking to build an ownership culture and compete for talent in today's market, liquidity has become an important strategic element. Whether a private company plans to offer liquidity on a one-off or recurring basis, creating a proactive liquidity strategy can ensure there is enough time to prepare for the transaction and educate employees on what it could mean for them.

"When planning a liquidity program, management should work closely with their board of directors to think through who should be eligible to participate and how much any particular shareholder can sell," said Mike Jung, partner and cofounder at Founders Circle Capital. "Alignment between stakeholders is key to any successful program."

4. Harness the power of employee education

Even the most competitive equity packages are rendered ineffective if employees don't understand them. As ongoing market volatility contributes to higher levels of employee financial stress, companies can support staff by having transparent conversations about the implications of equity ownership — and how it can help people achieve their financial goals. 

Offering resources and support for employee financial wellness can be a powerful way for a private company to improve the overall effectiveness of its equity plan, while investing in the financial wellbeing of employees. Giving employees the tools to navigate major life milestones and address financial needs that arise can help improve employee engagement.

Whether your company is a startup or late-stage private company, an equity plan can be a critical driver of growth and a key tool for attracting and retaining talent. Creating an effective equity plan starts with building a solid foundation. And with a partner to help design or evolve your equity plan management strategy, your organization will be well-prepared for its next stage of growth.  

Learn more about how Morgan Stanley at Work can help your company build a culture of shared ownership. 

This post was created by Insider Studios with Morgan Stanley at Work. 

^{Morgan Stanley Smith Barney LLC ("Morgan Stanley") and its Financial Advisors and Private Wealth Advisors do not provide any tax/legal advice. Consult your own tax/legal advisor before making any tax or legal-related investment decisions.}

^{Not all products are available in all jurisdictions and countries.}

^{Morgan Stanley at Work services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley.} 

^{©2024 Morgan Stanley Smith Barney LLC.  Member SIPC.}

^{CRC#6463905    03/2024}

from All Content from Business Insider https://ift.tt/7XKZWBb
via IFTTT

• Alphabet paid Apple $20 billion in 2022 to remain Safari's default search engine, court documents show.
• That's a $2 billion increase compared to the reported amount Google paid Apple in 2021.
• The deal is key evidence in a US antitrust lawsuit alleging Google has an illegal search monopoly.

The price to be the default search engine on iPhones, iPads, and Macs has apparently gone up.

Newly disclosed court documents from the US Department of Justice's antitrust case against Google indicate the tech giant paid over $20 billion in 2022 to secure itself as the default search engine on Apple's Safari browser.

That's at least $2 billion more than the reported price it paid Apple in 2021. Google reportedly paid Apple around $18 billion in 2021, surpassing a billion dollars every month, according to court documents.

Public disclosure of the documents is a big deal, because both parties have kept quiet about the exact dollar amount of the arrangement, and the numbers have also been excluded from SEC filings.

At the trial last fall, Apple execs remained cryptic about the payment and said Google spent "billions" on a deal with Apple. A witness later accidentally revealed Google pays 36% of the revenue it earns from search ads through Safari.

The $20 billion deal with Apple is a key piece of evidence in the US' landmark antitrust lawsuit against Google. Since 2005, the agreement has required Apple to pre-set Google as Safari's sole default search engine on its devices, according to the court documents.

It's a highly valuable deal for Apple. In 2021, Bernstein analysts estimated that Google's payments to Apple made up over 14-16% of the iPhone maker's operating income.

While Google has been paying Apple to be the default search engine on Apple devices since 2002, the value of the deal has increased significantly. In 2014, Google was paying $1 billion, according to court documents filed in a separate case involving Oracle.

The court documents say that in search, Google and Apple seek to "work as if [they] are one company."

An email from Google's president of global partnerships and corporate development Donald Harrison said in 2018 that Tim Cook's "overall message to Google was 'I imagine us as being able to be deep deep partners,'" and "deeply connected" at the point where Apple's services end and Google's begin, according to the court documents.

As Apple's biggest smartphone competitor, the deal also reveals a complex relationship between the two tech giants. Court documents revealed that Google CEO Sundar Pichai at one point said the company "continued to have moments of tension" with Apple, as they compete over Android and iPhone and other rival products.

Spokespeople for Google and Apple didn't immediately respond to Business Insider's requests for comment ahead of publication.

Closing arguments are taking place this week in the antitrust case against Google, with the US Department of Justice arguing Google is illegally dominating the search engine market. Google has denied the allegations.

Apple is also fighting its own antitrust lawsuit that accuses the iPhone maker of illegally maintaining a smartphone monopoly by making its competitors' offerings worse, allegations that Apple has denied.

from All Content from Business Insider https://ift.tt/czMLWl7
via IFTTT

• Testimony in Donald Trump's NY trial was delayed Thursday morning by still more gag-violation arguments.
• "Everybody can say anything they want except for President Trump!" his lawyer complained
• Trump's lawyers flagged Biden's "stormy weather" and Michael Cohen's Donald 'Von ShitzInPants' cracks.

Another week, another contempt-of-court hearing for Donald Trump — and this one was a doozy.

On Thursday morning, prosecutors at Trump's Manhattan hush-money trial argued that he violated his gag order last week, during four on-camera statements in which he attacked witnesses and the jury.

Things got weird when defense attorney Todd Blanche complained that Trump must remain silent about witnesses and jurors while his opponents get to say whatever they like.

That's when President Joe Biden and "Von ShitzInPants" made their bizarre cameo appearances on the official trial record.

Biden "mocked President Trump," Blanche complained to the judge, quoting into the record a joke the president had made at the White House Correspondents' dinner on Saturday.

"I've had a great stretch since the State of the Union.  But Donald has had a few tough days lately. You might call it stormy weather," Biden had quipped apparently in reference to Stormy Daniels, the porn star at the center of Trump's hush-money trial.

Blanche lamented to the judge, state Supreme Court Justice Juan Merchan, "President Trump can't respond to that" by criticizing Daniels.

Likewise, Trump's ex-personal attorney-turned-nemesis, Michael Cohen, can take whatever potshot he chooses, Blanche griped. 

Trump must remain silent, Blanche complained, even when Cohen mocks him as Donald "Von ShitzInPantz," a favorite insult of Cohen's podcast and commentary on the social media site X.

Blanche read that colorfully worded, offending tweet into the record as Trump himself sat listening at the defense table.

"Hey Von ShitzInPantz," Blanche recited as the court stenographer duly followed along.

"Your attacks of me stink of desperation," he continued quoting the Tweet. "We are all hoping that you take the stand in your defense."

"Everybody can say anything they want except for President Trump," Blanche told the judge.

Blanche read a few more Cohen tweets into the record. Again, Trump was required to remain seated to his left, listening.

They included this direct taunt: "Keep messing with me Donald and I won't send any money to your commissary!"

"Michael Cohen has gone on TikTok, nightly" and makes money from it, Blanche complained to the judge.

Last month, Cohen pledged to stop talking about Trump until after his testimony in the trial is over.

Merchan has already found Trump in contempt of court for gag violations. Last Thursday, he fined the GOP frontrunner $9,000 for nine online attacks on witnesses and jurors.

The judge did not immediately rule on the four additional Trump statements now before him.

Prosecutors are asking that Trump be fined another $4,000, the maximum allowed, for four on-camera statements Trump made last week.

Contempt of court is punishable under New York law by as much as 30 days in jail per violation. The DA's office has not asked for jail.

However, prosecutors and the judge have warned that jail may be appropriate if there are future violations.

from All Content from Business Insider https://ift.tt/Mw8v5C4
via IFTTT

• The US economy is still firing on all cylinders despite slowing GDP growth in the first quarter.
• Carson Group strategist Sonu Varghese highlighted five economic indicators that show the strength.
• "The workhorse of the US economy remains the consumer, and there's really not much sign of a slowdown," Varghese said.

The US economy is firing on all cylinders despite a slowdown in first-quarter GDP growth, according to Carson Group global macro strategist Sonu Varghese.

Varghese highlighted five economic indicators that show continued underlying strength in the US economy, giving him little reason for concern as the labor market continues to power higher.

"The workhorse of the US economy remains the consumer, and there's really not much sign of a slowdown as far as household spending is concerned," Varghese said in a note last week. "In fact, services spending, which makes up 45% of the economy rose at an annualized pace of 4%."

That 4% growth rate is more than double the 1.8% growth trend seen from 2010 through 2019, according to Varghese, and it represents the fastest pace of growth since the third-quarter of 2021. 

"The current strength of consumption is directly related to the strength of American household finances," Varghese said.

These are the five indicators that give Varghese confidence that the US consumer, and therefore the US economy, remains on solid footing.

1. Income growth is outpacing inflation

Despite elevated inflation, wage growth continues to outpace inflation growth, and that's ultimately a boon for consumers.

Disposable incomes grew at an annualized pace of 4.8% in the first-quarter, and employee compensation soared 7.8%. Meanwhile, PCE inflation rose 4.4%.

"That's the simplest explanation for why consumption continues to run strong," Varghese said.

2. Average hourly earnings are also outpacing inflation

It's not only high-income earners that are seeing their wages outpace inflation. The average every-day worker is also seeing their income grow faster than the pace of inflation.

"Inflation-adjusted hourly wages are growing even when you look at the average worker, and separate non-managers from managers," Varghese explained.

That's important because non-managers tend to spend a greater portion of their incomes from wages, so it's important that they see their wage growth outpace inflation. 

3. Consumer balance sheets are strong

A continued rise in the stock market and housing prices means Americans are more wealthy today than they have ever been.

US consumers held a collective $176.7 trillion in assets as of December 31, and their liabilities have not risen as quickly as their assets have.

That means consumers have ample room to spend money and save less, which makes it no surprise that the savings rate of US consumers has steadily declined over the past few years to 4.2% today from 7.4% in 2019.

"This is not surprising considering net worth is higher. Why save more if you're worth more?" Varghese said. 

4. Consumer's have capacity to borrow more

Across all levels of the income spectrum, consumers owe less in debt relative to their income than they have in decades.

The household debt service ratio, which measures debt payments as a percentage of disposable income, stood at 9.8% in the fourth-quarter of 2024. That's significantly below the 13.3% peak hit in 2007 and the historical average of 11.2%, and it suggests that consumers have ample flexibility to borrow more money and consumer if they have to. 

"Across all income groups, liabilities as a percent of assets are well below what we've seen historically. In short, households are significantly less levered than in the past," Varghese said.

5. The jobs market is still resilient

"The labor market is the entire ballgame as far as the consumer is concerned. If the labor market deteriorates, incomes fall, consumption falls, and the economy is in trouble," Varghese said.

And so far, there are no signs of that happening. "We have the opposite now," Varghese highlighted.

The unemployment rate has stayed below 4% for 26 consecutive months, representing the longest streak since the late 1960s. 

Meanwhile, there is still more than one job opening for every unemployed worker, and weekly jobless claims continue to hover near historically low levels. 

"Ultimately, here's what's important to keep in mind: consumption makes up 70% of the US economy, and right now consumption is running strong thanks to strong labor markets, which are pushing incomes higher to above the pace of inflation, and higher net worth, which means households can spend more," Varghese concluded.

from All Content from Business Insider https://ift.tt/PNiF7Ua
via IFTTT

•  Pinpoint Asset Management is a Hong Kong-based hedge fund with offices in Shanghai and Singapore.
• The firm was founded 25 years ago and runs a China-focused fund and a multi-strategy offering.
• The two funds have generated strong returns through mid-April, according to HSBC's Hedge Weekly report.

After a couple of years of poor performance and dwindling assets, Hong Kong-based Pinpoint Asset Management has surged so far in 2024.

According to HSBC's Hedge Weekly report, the firm's China fund gained more than 2% through the first two weeks of April to bring its year-to-date returns to just under 8%. The firm's multi-strategy fund was up 1.8% for the month through April 15, to bring its 2024 gains to 6%. The S&P 500 through the same period was up roughly 6.7%.

Each fund manages more than $1 billion at the 25-year-old firm that originally began in Shanghai. Founder and chief investment officer Wang Qiang runs both funds. The firm, which also has an office in Singapore, did not return requests for comment.

The China fund had a run of poor performance given the country's economic slowdown. In 2023, the fund lost more than 6%. According to HSBC, the fund was also down more than 13% the year prior. The performance so far in 2024 has beaten out other funds focused on the region — Hedge Fund Research's China index was up just 0.43% through the end of March.

The firm's younger multi-strategy offering returned less than 1% in 2023 and lost money in 2022, trailing U.S.-based competition that soared during these years. The fund is part of a growing subset of Asia-based multi-strategy managers that are competing with American giants like Citadel and Millennium for local talent.

The manager took the step of introducing a pass-through fee structure to pay for portfolio manager compensation recently in order to keep up.

from All Content from Business Insider https://ift.tt/2wcjqRF
via IFTTT

• George Warren added two ADUs to a duplex property he bought in 2004, aiming to earn extra income.
• In December, he started renting them for $2,000 a month each and has already earned $20,000.
• The ADUs have been so successful he plans on building more on another plot of land he owns.

This as-told-to essay is based on a conversation with George Warren, a 67-year-old adjunct journalism professor and real estate investor, who built two accessory dwelling units (ADUs) on his land. The essay has been edited for length and clarity.

My wife and I live in a century-old home in Sacramento, but also own 13 investment properties spread throughout Texas and California.

In 2004, we bought a $300,000 investment property, a duplex in Midtown Sacramento, which we rent out. The area has a vibrant and diverse community with a lot of restaurants and pubs. It's really walkable and a very desirable place to live.

The 2400-square-foot duplex was built in 1890 and sits on a 160-by-30-foot lot. When we first bought the property, half of it consisted of dirt, primarily used by tenants for parking and occasionally by homeless people who would wander in.

I realized that having a half-empty lot wasn't the best use for the property, so for several years, I contemplated what I was going to do to increase its value and generate additional income.

In 2019, I hired a surveyor to initiate a lot split because I was considering building rental units on the property. My plan was to split the lot by 80 feet for the duplex and 80 feet for whatever I was going to build in the back.

I was quoted $1.5 million to build five small loft studios. I knew there was no way that would have ever cash-flowed in my lifetime, so I pulled the plug on that project.

But when the state and the city began to embrace ADU development, I jumped on it.

Last year, I built two cottages on the duplex's lot and began renting them out as ADUs. From December until the end of April, I've made $20,000 in passive income.

I think I made the right decision.

ADUs can cost a lot to build

If you build an ADU on your primary property, you're going to have strangers coming and going where you live. It didn't appeal to me to have tenants at my primary residence, so building on the duplex's lot made the most sense.

In 2022, I contacted Anchored Tiny Homes to get the ball rolling for the construction of ADUs. After several months of collaboration with the company's design team, we submitted an application to the city of Sacramento.

With Sacramento allowing up to 1,200 square feet per ADU, I chose to build two 600-square-foot cottages on the lot. My application was approved within 60 days.

To finance the project, I took out a second home equity line of credit on my main residence for $350,000, which I wasn't initially anticipating.

I was aware of California's CalHFA's ADU grant program — that provides up to $40,000 for planning blueprints and more — but learned I did not qualify because the duplex was not my primary residence.

We broke ground in January 2023 and wrapped up construction in September. There were a few hold-ups during the process, like squatters in the alley and an inspector who halted construction for a while due to an electrical issue, but overall, it went smoothly.

Anchored initially quoted me $174,000 per cottage, but with additional upgrades, they ended up costing about $200,000 each.

They're both 20 by 30 feet and have one bedroom, one bathroom, a living room, and a kitchen with an island. The homes are also fully furnished and have brand-new appliances. My tenants also have their own entrance to the lot by way of a historic alley.

I cover all the utilities, provide YouTube TV, and offer high-speed fiber internet to my tenants.

For a rental property, I think it's really good.

I want my tenants to feel comfortable

I don't rent the cottages out for short-term rentals on Airbnb or VRBO. Instead, I use Furnished Finder, which is aimed at mid-term rentals, typically around 90 days, and caters mostly to traveling professionals.

For cottage 1909, my first tenant was a traveling ballet director who worked on Sacramento's Nutcracker during Christmas. He stayed for a month and paid me $2,000.

When he left, he was replaced by a nurse from Atlanta. She's here for the entire calendar year and also pays $2,000 a month.

I've had two other tenants in cottage 1907, including the current one, who have also paid me $2,000 monthly.

So far, I've been fortunate to have a fantastic group of tenants —typically high-earning professionals. Their payments are always on time, and they consistently leave the place spotless.

I know I could charge more in rent and adjust to market rates, but I don't want to price gouge people or create headaches.

I want them to feel comfortable and realize they're getting great value — so far, it's worked.

I made the right decision

Ultimately, the goal of real estate investors is to make passive income.

The ADUs have done that and more for my wife and me. As I decouple from my various jobs, it's reassuring to have this income stream, and it's also provided a fabulous opportunity to lower our taxable income by thousands of dollars.

I've had such good luck with these ADUs so far that I plan on building more on another lot I have near Sacramento State University.

It's free money. So what the hell do I have to lose?

from All Content from Business Insider https://ift.tt/cNl85IP
via IFTTT

• Tesla has laid off most of its charging team, causing confusion about the future of its Supercharger network.
• Virtually all major automakers have adopted Tesla's charging tech
• Tesla has committed to doubling its network size in-party with public money. 

It started as a drip. Ford would adopt Tesla's charging connector and its customers would get access to the Supercharger network.

Then it became a flood. General Motors, Rivian, and more would join the network. By the time 2023 ended, virtually every major automaker had announced plans to adopt the North American Charging Standard. It was a major win for Tesla and another massive vote of confidence for what drivers had known for a long time: Elon Musk's chargers are simply the best, and he'll help the entire EV industry — not just Tesla — expand.

All of that came into question this week, when Tesla laid off most of its charging team, impacting about 500 employees. The apparent about-face left customers, contractors, and even newly partnered automakers scratching their heads about the future.

While hundreds of employees were surprised by layoff emails earlier this week, those who do business with them were dumbfounded.

"I got a bounce from every email address," said Andres Pinter, co-CEO of Bullet EV Charging Solutions, which has about a dozen ongoing projects underway for Tesla. Other contractors, he said, could be in trouble if they don't have non-Tesla projects to fall back on.

As of Wednesday morning, he'd still not heard a peep from anyone at Tesla, he said. Tesla did not respond to a request for comment on its Supercharger plans.

Tesla accounts for about 65% of the nation's fast-charging plugs, according to data from the Department of Energy, and one analyst has said the Supercharger network could be worth as much as $100 billion. After Tesla shares fell following the layoff news, Musk said on X that Tesla would still grow its Supercharger network, but "at a slower pace for new locations" with more focus on reliability.

Tesla drivers, meanwhile, were already worried about bigger lines at already-swamped Superchargers once other models of cars were given the keys to the kingdom.

"It kind of defies logic," Pinter said. "I think that Elon Musk is playing three-dimensional chess and maybe this will all make sense to us in like a few months."

Until then, it's not clear how Tesla will fulfill its 2023 commitment to double the size of the Supercharger network by the end of this year (partially with $17 million in government grants.)

Tesla has been rapidly expanding its Supercharger network in recent months. US plugs totaled around 20,000 in August 2023, a figure that has grown about 8% every quarter since, according to the Department of Energy. In the first three months of 2024 alone, it built some 297 stations around the world.

The automakers Tesla partnered with can already access existing plugs, but the recent layoffs raise questions about the network's future growth. Prior to the layoffs, one estimate said Tesla could earn up to $12 billion a year in charging revenue by 2030 by opening its charging stations to non-Teslas. Perhaps that's not enough to offset the costs of rapidly building new Supercharger stations that will ultimately benefit other carmakers, as well as Tesla.

For automakers and EV owners watching on the sidelines, thinking their charging problems were largely taken care of, the current moment can't feel great.

from All Content from Business Insider https://ift.tt/snjb9Ux
via IFTTT

• Austria's Migaloo is offering to build a private "submersible superyacht" for the ultrarich.
• It says the M5 would be able to travel 820 feet underwater and stay submerged for a month.
• Despite the high up-front cost, CEO Christian Gumpold says the firm is in talks with buyers.

Forget megayachts. Forget billionaire basements. If you're unfathomably rich and want a new toy, there's an Austrian company that says it will build you a fully submersible yacht.

And this is no rickety Titan submersible.

The Migaloo M5 concept, the company says, involves a 540-foot base-model superyacht that would travel about 820 feet underwater and stay down there for up to a month.

"The needs of superyacht owners for their vessels are more complex than ever," Migaloo CEO Christian Gumpold told Business Insider, adding: "These wishes do not just include performance, length, or design."

Gumpold said that yacht owners were "looking for privacy, security, and protection for themselves, their guests and their valuables, or for the fulfillment of unique experiences up to scientific desires, as well as for the greatest possible exclusivity."

According to its marketing materials, Migaloo says the vessel's layout and features could be designed around any customer priority, whether that's security, thrill seeking, research, or simply vacation.

The company offers prospective buyers a checklist of options, including LED exterior lighting with a laser show, a helipad, a hot-air balloon, and — for the aspiring Bond villain — an underwater shark-feeding station.

The vessel could feasibly host a wealth of supplemental vehicles, including mini submarines, exploration vehicles, and working boats, it said.

Although at times it's described in the company marketing materials as a "private submersible superyacht" the M5 would technically be able to sail as a submarine — an underwater vessel that can launch itself and return under its own power, rather than having to be launched by a mother ship.

It's envisioned as being able to house up to 20 guests and about 40 staffers.

The Migaloo concept aims to satisfy an increasing desire for privacy and security among the world's richest people.

The most expensive megayachts ever sold now run into the half-billion-dollar range or more, with at least three $600 million yachts afloat, owned by various oligarchs and oil-state royalty.

Bobbing about underwater in a Migaloo M5, Elon Musk wouldn't have to worry about a jet-tracking student any longer.

Gumpold told BI he had specialized in yacht design since 2008, and he promised that all the complex arrangements of the Migaloo project — working with shipyards, flag states, and classification societies — would be taken care of by his company.

Much of the marketing material for Migaloo runs to possibilities that sound like science fiction, addressing problems that would either apply only to the ultrarich or which the rest of us would be too dead to care about.

Saying it works with the security company Safe, Migaloo claims it could create a "private submersible fortress," offering protection from electromagnetic pulses, cybercrime, piracy, solar flares, asteroids, and polar shifts.

That's on top of a gamut of features that any megayacht owner might expect, including spas, gyms, a gaming room, a wine cellar, an art gallery, and a panic room.

The cost, however, is the ultimate "if you have to ask, you can't afford it" test.

Gumpold told Fast Company that the price depended on the scope of the client's requests, comparing it to the price tag on large superyachts.

According to Fast Company's estimation, there are only 50 people in the world who could afford to purchase a luxury submergible megayacht.

It remains to be seen if and when any prospective buyers will bite.

Gumpold told BI his company was "still in close contact with several potential owners worldwide" and "very close" to executing the first project steps.

But he didn't elaborate on any concrete steps and wouldn't name any of his prospective clients.

With a turnaround time of about four to seven years, it's also going to be awhile before any of them would take to the seas.

from All Content from Business Insider https://ift.tt/XjRyqO8
via IFTTT

• Virtual reality is emerging as a transformative tool in mental-health treatments.
• The tech is helping mental-health providers treat conditions such as depression, anxiety, and PTSD.
• This article is part of "Build IT," a series about digital tech trends disrupting industries.

Mental illnesses affect millions of lives across the US. The Centers for Disease Control and Prevention's statistics paint a stark picture: More than 20% of US adults have a mental illness, with a similar proportion seen among people ages 13 to 18.

In the face of this staggering prevalence, virtual reality offers transformative solutions in mental-health treatment and care. Recent research has found that VR can be effective in the treatment of PTSD, body-image disturbances, and stress-related disorders. Its use cases include trauma-focused therapy, as well as mindfulness exercises and social-skills training.

Increased relaxation through immersive VR tech

Shel Mann, a cofounder and the CEO of the VR-development company FireflyVR, told Business Insider that VR could help open the brain's window of neuroplasticity and make it more receptive to relaxation and mindfulness practices, which could lead to positive feelings and behaviors.

Mann said the company's research found that integrating biophysical signal recordings, such as patients' eye gaze and heart-rate variability, into immersive VR applications could enhance outcomes. Physiological responses offer reliable measures for assessing users' emotions and anxiety levels, which could revolutionize therapeutic effectiveness.

Dr. Christopher Romig, the director of innovation at the mental-health clinic Stella, uses FireflyVR tech to ease patients' anxiety before ketamine-infusion therapy, which is the intravenous administration of the drug. It's used to treat conditions such as depression, anxiety, and PTSD. The combination of ketamine and VR-guided therapy, he told BI, fosters neural connectivity at optimal brain-receptivity periods by helping calm patients.

VR is an engaging method for improving a patient's comfort and compliance during treatment sessions, Romig said. A patient's stress from their daily life "must be placed aside before they start their ketamine session, and the use of VR, setting intentions, and breath work are all very beneficial to helping ketamine establish the happy, healing pathways," he added.

He uses FireflyVR's platform, The Sanctuary, a clinically designed VR experience that uses cognitive-behavioral therapy to reduce patients' anxiety before they undergo ketamine therapy.

Before the ketamine treatment, Romig said, patients enter "a virtual world where they learn about setting intentions, letting go, ritual breathing, and creating positivity."

"I use it to create the 'peaceful mind' for my patients," he said. "It has so many applications, and I think you'll see a lot more VR working its way into mental health in conjunction with biofeedback and AI."

The mental-health-care crisis in the US means forward-thinking solutions are crucial. "We know there's a shortage of therapists," Mann said. "This isn't a nice-to-do; it's a need-to-do."

The Sanctuary was adapted for addiction treatment within the Veterans Affairs system. Mann said this was just one example of how the platform could be used. "When you're in VR, in an immersive setting, you're there. It really fools your brain," Mann added.

With The Sanctuary, users learn about elements such as meditation and breathing techniques, allowing real-life therapists to focus their efforts more on the specifics of patients' diagnoses.

VR cue exposure and embodiment

Nicole Siegfried, the chief clinical officer at Lightfully Behavioral Health, uses VR for patients with eating disorders and body-image disturbances. Patients can use the VR tech in an office or, in some situations, take a VR device home and return it after use.

VR cue exposure, Siegfried said, helps reduce binge-eating habits by exposing people to triggering stimuli in a controlled environment. Siegfried said cue exposure "can create a habituation to the cue, so when the client is confronted with the cue in real life, a binge is less probable."

Additionally, VR allows people with a negative body image to see themselves with different body sizes in a safe space via embodiment. "The goal is to decrease discomfort with weight gain in anorexia," Siegfried said. The patient may experience increased acceptance of their appearance through repeated exposure via virtual simulation.

Both cue exposure and embodiment aim to address the complex psychological dynamics of eating disorders. Siegfried emphasized VR's ability to immerse people in scenarios that are challenging to create in real life.

It acts as a gateway, helping users overcome fears and challenges by digitally placing them in fraught scenarios. For instance, clients with panic disorder or agoraphobia can virtually leave their homes.

"Most clients report a decrease in distress and an increase in willingness during the session," Siegfried said. "Between sessions, there is often a drift back toward baseline, which is why multiple sessions are necessary." She added that these VR applications were "most effective as a step toward in vivo — in life — exposure." The goal is to get clients integrated into normality through exposure-based treatments.

Siegfried told BI that VR could also provide imaginal experiences: A burn victim could be virtually covered with snow in an effort to reduce pain, and someone who's afraid of flying could go through a simulation of traveling by flight, which could include arriving at the airport, checking in, landing, and picking up baggage. "This simulation can be repeated until anxiety reduces and willingness increases," said Siegfried.

Because VR applications are relatively new, it might be difficult to find therapists who are adequately trained to effectively use the tech. Equipment can also be expensive, making some therapists reluctant to integrate VR use into their practices.

Progress is certainly underway, but it'll take more time for the technology to gain prevalence in mental-health care.

from All Content from Business Insider https://ift.tt/QjCAfIF
via IFTTT