Welcome to <keyword id="11907098" type="UNKNOWN" weightage="60" keywordseo="insider-finance" source="Orion">Insider Finance</keyword>. If this was forwarded to you, <a href="http://newsletter.businessinsider.com/join/4np/insider-finance">sign up here</a>. Plus, download Insider's app for news on the go - <a href="https://apps.apple.com/app/apple-store/id554260576?pt=385758&amp;ct=06292021_newsletters&amp;mt=8amp;mt=8">click here for iOS</a> and <a href="https://play.google.com/store/apps/details?id=com.freerange360.mpp.businessinsider&amp;r[%E2%80%A6]ers%26utm_medium%3Demail%26utm_term%3D06292021%26anid%3Dadmobdmob">here for Android</a>.On the agenda today:<ul><li>Lazard's advisory CEO thinks he's found the key to <a href="https://www.businessinsider.com/lazard-advisory-ceo-peter-orszag-back-to-office-plan-delayed-2021-8">successful hybrid work.</a></li><li>Point72 is undergoing a massive overhaul to transform <a href="https://www.businessinsider.com/point72-cloud-tech-transformation-hedge-fund-aws-mark-brubaker-2021-9">into a cloud-first operation.</a></li><li>Citadel has outpaced its <a href="https://www.businessinsider.com/citadel-ken-griffin-august-performance-melvin-capital-2021-9">multi-strategy rivals so far this year. </a></li></ul>Let's get started. <hr /><a href="https://www.businessinsider.com/lazard-advisory-ceo-peter-orszag-back-to-office-plan-delayed-2021-8">The secret to hybrid work? Staying home Mondays and Fridays</a><a href="https://www.businessinsider.com/lazard-advisory-ceo-peter-orszag-back-to-office-plan-delayed-2021-8"></a>Lazard advisory CEO Peter Orszag thinks he may have found the key to a successful hybrid return-to-office plan. Starting in October, Lazard bankers will come into the office three days a week, and will work remotely on Mondays and Fridays. <a href="https://www.businessinsider.com/lazard-advisory-ceo-peter-orszag-back-to-office-plan-delayed-2021-8">Why Orszag thinks it may be the secret to hybrid work.</a><hr /><a href="https://www.businessinsider.com/point72-cloud-tech-transformation-hedge-fund-aws-mark-brubaker-2021-9">Steve Cohen's Point72 is betting big on the cloud</a><a href="https://www.businessinsider.com/point72-cloud-tech-transformation-hedge-fund-aws-mark-brubaker-2021-9"><div type="image" title="steve cohen hedge funds 4x3" height="1249" width="1666" msid="86035366" hostid="261"></div></a>Point72 is in the middle of a five-year plan to turn the $21.8 billion hedge fund into a cloud-first operation. Expected to wrap up in 2024, the project aims to migrate 70% to 80% of the hedge fund's cloud-eligible applications to the new tech. <a href="https://www.businessinsider.com/point72-cloud-tech-transformation-hedge-fund-aws-mark-brubaker-2021-9">The firm's chief technology officer walked us through the process.</a><hr /><a href="https://www.businessinsider.com/citadel-ken-griffin-august-performance-melvin-capital-2021-9">Citadel is outpacing its rivals so far this year</a><a href="https://www.businessinsider.com/citadel-ken-griffin-august-performance-melvin-capital-2021-9"><div type="image" title="ken griffin citadel" height="1665" width="2221" msid="86035368" hostid="261"></div></a>Ken Griffin's $38 billion hedge fund is up nearly 10% for the year - and is outstripping multi-strategy rivals like Millennium, Point72, and ExodusPoint. <a href="https://www.businessinsider.com/citadel-ken-griffin-august-performance-melvin-capital-2021-9">Here's what you need to know.</a><hr /><a href="https://www.businessinsider.com/rockefeller-capital-strategic-advisory-deals-mergers-acquisitions-2021-8">Rockefeller Capital is beefing up its dealmaking team</a><a href="https://www.businessinsider.com/rockefeller-capital-strategic-advisory-deals-mergers-acquisitions-2021-8"><div type="image" title="Greg Fleming of Rockefeller Capital" height="1000" width="1333" msid="86035370" hostid="261"></div></a>Rockefeller hired three new managing directors in under a year to grow its strategic advisory arm, which has quietly been nabbing credit on multibillion-dollar deals. We spoke with two managing directors, <a href="https://www.businessinsider.com/rockefeller-capital-strategic-advisory-deals-mergers-acquisitions-2021-8">who shared their plans for expansion - and outlined which sectors are hot for M&amp;A.</a><hr /><a href="https://www.businessinsider.com/china-regulatory-crackdown-expert-investors-analysts-2021-8">These experts are helping investors make sense of China right now</a><a href="https://www.businessinsider.com/china-regulatory-crackdown-expert-investors-analysts-2021-8"><div type="image" title="Staggered headshots of Junheng Li, Zac Dychtwald, Jing Sima, and Carson Block (left to right) on a red background with a yellow outline" height="900" width="1200" msid="86035371" hostid="261"></div></a>In the midst of China's regulatory crackdowns, big-name investors are turning to these 10 China-focused analysts, strategists, and short-sellers for guidance. <a href="https://www.businessinsider.com/china-regulatory-crackdown-expert-investors-analysts-2021-8">Here's how strategists from BCA Research to Gavekal are approaching China.</a><hr />On our radar:<ul><li>Staffers of the country's top real-estate broker say she threw things at them and made employees' lives miserable. <a href="https://www.businessinsider.com/working-for-darcy-stacom-cbre-commercial-real-estate-broker-nyc-2021-9">What it's like to work with the Queen of the Skyscrapers.</a></li><li><keyword id="11895526" type="UNKNOWN" weightage="60" keywordseo="wall-street" source="Orion">Wall Street</keyword> is preparing for a flood of IPOs, according to Axios. More than 100 companies are expected to go public <a href="https://www.axios.com/wall-street-ipo-flood-419d87ba-749d-459c-9086-941d65b1ddf6.html">by the end of the year.</a></li><li>Per Bloomberg, Morgan Stanley is expanding its program to hire more Black and female staffers to London. <a href="https://www.bloomberg.com/news/articles/2021-09-07/morgan-stanley-expands-hunt-for-black-traders-to-london">More on that here.</a></li><li>WSJ writes that banks are on track for the busiest year ever, thanks to <a href="https://www.wsj.com/articles/deals-deals-deals-banks-feast-on-merger-bonanza-11631007002?mod=hp_lead_pos1">a months-long deal spree.</a></li><li>State Street has agreed to buy Brown Brothers Harriman Investor Services for $3.5 billion, WSJ reports. <a href="https://www.wsj.com/articles/state-street-to-buy-brown-brothers-harriman-investor-services-for-3-5-billion-11631021246">The deal is the bank's largest since it bought Charles River three years ago.</a> </li></ul>

Lazard's key to hybrid work - Point72 all-in on the cloud - Citadel outpaces rivals

<ul class="summary-list"><li><keyword id="11893875" type="UNKNOWN" weightage="100" keywordseo="markets" source="Orion">Markets</keyword> are worrying over the fate of giant Chinese property developer <keyword id="11893545" type="UNKNOWN" weightage="60" keywordseo="evergrande" source="Orion">Evergrande</keyword>, which is in big trouble.</li><li>Yet a number of top analysts have said China's government is likely to contain the problem and insulate the <keyword id="11921987" type="UNKNOWN" weightage="60" keywordseo="global-economy" source="Orion">global economy</keyword>.</li><li>However, <keyword id="11898782" type="UNKNOWN" weightage="60" keywordseo="michael-burry" source="Orion">Michael Burry</keyword> of "Big Short" fame is among those worried that Evergrande's demise could send shockwaves across markets.</li></ul>The fate of Evergrande, a highly indebted Chinese property developer, has become a <a href="https://markets.businessinsider.com/news/stocks/stock-market-today-evergrande-default-loan-payment-fed-meeting-oil-2021-9">worry for investors</a> around the world.Evergrande is China's second-biggest property developer and has huge debts, with around $300 billion of liabilities to banks and bondholders. It warned earlier in September that it could <a href="https://www.nbcnews.com/news/world/chinese-property-giant-evergrande-warns-it-could-default-debt-n1279108">fail to pay its creditors</a>, prompting some investors to panic-sell its bonds. On Monday, Dow futures plunged more than 500 points and Hong Kong's <a href="https://markets.businessinsider.com/index/hang_seng">Hang Seng</a> stock index tumbled 3.3%, as investors braced for a big week in which Evergrande could default. It has a $83.5 million bond interest payment due Thursday.If it does default, the fallout could hit Chinese suppliers as well as foreign investors including BlackRock and Allianz.Some have suggested that if Evergrande collapses, it could be China's <keyword id="12122929" type="UNKNOWN" weightage="60" keywordseo="lehman-brothers" source="Orion">Lehman Brothers</keyword> moment, referring to the role played by the demise of the US investment bank in the 2008 financial crisis.Yet many market experts have said that Evergrande is too big to fail and is likely to be rescued by the Chinese government, limiting the economic impact on China and the world.<h3>Many analysts say China's government will save the day</h3>Bond market expert Ed Yardeni, president of Yardeni research, <a href="https://www.cnbc.com/2021/09/19/china-developer-evergrandes-debt-crunch-and-us-markets-ed-yardeni.html">told CNBC</a> he thinks it will act to limit any impact on the financial system."The reality is (Evergrande) is too big to fail, and I think the Chinese government is going to intervene big time," he said Sunday. "It will be restructured, and in a way, that won't harm the economy too much over there and won't affect the global economy or financial markets the way Lehman did."Hui Shan, chief China economist at Goldman Sachs, said: "The authorities will not allow a situation where a disorderly default of Evergrande spirals into a crisis," writing in a note Monday.Yet she said to avoid contagion, "it is imperative for the government to provide clear communication ... and to shore up confidence among homebuyers, suppliers and contractors, banks and other non-bank financial institutions."Simon MacAdam, senior global economist at Capital Economics, said: "A managed default or even messy collapse of Evergrande would have little global impact beyond some market turbulence.""Even if it were the first of many property developers to go bust in China, we suspect it would take a policy misstep for this to cause a sharp slowdown in its economy," he said.But MacAdam added: "Given how bloated China's property developers are, there could be a whole wave of defaults around the corner, which would have the potential to kick-start a hard landing."<h3>Markets should brace for some 'big bumps' along the way</h3>Some others think Beijng won't be able to keep a grip on things. Shane Oliver, chief economist at Australian bank AMP Capital, said Evergrande's size makes it highly dangerous. He expects Beijing to step in, but said there could be "a few big bumps along the way.""At about 6.5% of total Chinese property sector debt ... its collapse and liquidation could have a systemic impact like that of Lehman Brothers in 2008, in terms of a flow on to the Chinese property and financial sectors and its economy."Also concerned is legendary investor George Soros, founder of Soros Fund Management. He said in a <a href="https://www.ft.com/content/ecf7de34-e595-4814-9cbd-4a5119187330">Financial Times piece</a> that it is "over-indebted and in danger of default. This could cause a crash."Famed investor Michael Burry of "Big Short" fame <a href="https://twitter.com/michaeljburry/status/1439665018543304710?s=20" target="_blank" rel="noopener noreferrer">endorsed a Twitter thread</a> by a financial analyst saying that contagion is already at work in Chinese markets, and could soon spill abroad."There are significant losses already for the international holders of China credit and equities," the analyst wrote. "Uncertainty and volatility will remain elevated."Read more: <a href="https://www.businessinsider.com/china-regulatory-crackdown-expert-investors-analysts-2021-8">Big-name investors are navigating China's complex landscape right now by turning to these 10 experts from firms like Muddy Waters and BCA Research</a>

Evergrande's looming default is spooking markets, but three top analysts say this isn't China's 'Lehman Brothers moment'

<ul class="summary-list"><li><keyword id="11921643" type="UNKNOWN" weightage="60" keywordseo="bank-of-america" source="Orion">Bank of America</keyword> reported third-quarter <keyword id="6357061" type="UNKNOWN" weightage="60" keywordseo="earnings" source="Orion">earnings</keyword> Thursday that beat analysts' profit estimates.</li><li>Its quarterly net income rose 58% to $7.7 billion, or 85 cents per share, as it booked record advisory fees.</li><li>"Our businesses regained the organic customer growth momentum we saw before the pandemic," CEO Brian Moynihan said.</li></ul><a href="https://markets.businessinsider.com/stocks/bac-stock">Bank of America</a> reported <a href="https://www.sec.gov/Archives/edgar/data/0000070858/000007085821000098/bac09302021ex991.htm">third-quarter earnings</a> Thursday that blew past analyst expectations, with a rise in profit driven by record advisory fees and a strong performance from its investment banking business. The US lender released $1.1 billion in reserves and booked an income tax benefit of $624 million, which helped lift its results.Also playing a part was BofA global banking's 23% rise in investment banking fees to a near-record $2.2 billion, as advisory fees shot up 65% to a record high of $654 million.Here are the key numbers:<ul><li>Earnings per share: $0.85 vs. $0.71 expected and $0.51 a year ago</li><li>Revenue: $22.8 billion vs. $21.7 billion expected and $20.3 billion a year ago</li></ul>It posted a 58% rise in net income to $7.7 billion, or $0.85 per share, for the quarter ended September 30. That topped an average estimate of $6.06 billion or $0.71 per share from analysts polled by Bloomberg. Those figures compare with earnings of $9.2 billion and $1.03 per share in the previous quarter for the bank, which counts Warren Buffett's Berkshire Hathaway as its largest shareholder with a 12% stake. It earned $4.9 billion and $0.51 per share in the same period last year, during the coronavirus restrictions.Big bank earnings are scrutinized for any indications as to the health of the US economy as it continues to reopen after pandemic restrictions. "We reported strong results as the economy continued to improve and our businesses regained the organic customer growth momentum we saw before the pandemic," CEO Brian Moynihan said in the earnings release."Deposit growth was strong and loan balances increased for the second consecutive quarter, leading to an improvement in net interest income even as interest rates remained low," he added.The lender's revenue for the third quarter rose 12% to $22.8 billion from $20.3 billion a year ago, as a result of stronger revenue from investment banking, and sales and trading. Analysts had expected $21.7 billion in revenue.Bank of America's shares rose 2.5% to $44.25 per share after the earnings release in premarket trading Wednesday. They are up 42% so far this year, compared with a 16.2% gain in the S&amp;P 500.Revenue in its global wealth and investment management rose 17% to $5.3 billion, driven by higher asset-management fees, and growth in loans and deposits. The global <keyword id="11893875" type="UNKNOWN" weightage="100" keywordseo="markets" source="Orion">markets</keyword> business relatively underperformed, posting a 4% decline in revenue to $4.5 billion. Ahead of the earnings release, Wall Street expected the lender's loan growth to improve from a weaker first half of the year. The bank's net interest income rose 10% to $11.1 billion, beating a StreetAccount estimate of $10.6 billion.Bank of America's key consumer-banking segment posted a 10% jump in revenue to $8.8 billion, and a slight increase in net income from last quarter.On Wednesday, <a href="https://markets.businessinsider.com/stocks/jpm-stock?utm_source=markets&amp;utm_medium=ingestgest">JPMorgan</a> posted third-quarter results that <a href="https://markets.businessinsider.com/news/stocks/jpmorgan-q3-profit-jump-beats-analyst-estimates-investment-banking-2021-10">beat profit estimates</a> as its advisory fees nearly tripled. The largest US bank released reserves of $2.1 billion.Read More: <a href="https://www.businessinsider.com/evergrande-crisis-china-experts-analysts-investing-opportunity-how-to-navigate-2021-10">Big-name investors are navigating the China Evergrande crisis right now by turning to these 8 experts from firms like Muddy Waters and BCA Research</a>

Bank of America beats 3rd-quarter profit estimates, lifted by record-high advisory fees and a $1.1 billion reserve release

<ul class="summary-list"><li>Tighter regulations are creating economic headwinds in China, particularly in property and energy.</li><li>Morgan Stanley said Asian economies are most exposed, followed by commodities giants such as Russia.</li><li>The bank found that the US should suffer little, given that trade is not a major part of its economy.</li></ul>The Chinese government is tightening regulations on property and pollution and it's shaking the country's economy.Rules limiting debt in the property sector have been a key factor in the looming default of giant developer <a href="https://markets.businessinsider.com/news/stocks/evergrande-stock-market-selloff-what-to-know-debt-crisis-china-2021-9">Evergrande</a>. And crackdowns on pollution have led to reductions in coal production, worsening an <a href="https://markets.businessinsider.com/news/commodities/coal-price-china-electricity-crisis-energy-apple-tesla-factory-australia-2021-09">energy crunch</a> and power shortages.In a note this week, analysts at Morgan Stanley weighed up which countries are likely to be most impacted by a slowdown in the world's second-biggest economy and largest trading nation."With a global trade share of 13.6%, changes in demand of the world's second-largest economy will reverberate through the global supply chain," the analysts, led by chief global economist Seth Carpenter, said.The most-exposed economies are in Asia, Morgan Stanley said. They're followed by countries that are key commodities suppliers such as Russia, as well as European Union countries who are closely linked through global trade."The US ranks as one of the least exposed economies in our analysis," the analysts wrote.Chinese slowdown to hit Asian economiesClose neighbours South Korea and Taiwan are likely to be hit hardest by any slowdown in China, with Asia's economy suffering as a whole from lower Chinese demand and production disruptions.Morgan Stanley thinks China's growth from 2022 to 2025 is likely to be on average 0.4 percentage points lower each year than previously expected. Such a decline would likely drag on Taiwan and South Korea's growth by just over 0.1 percentage points per year.Yet in Morgan Stanley's more pessimistic scenario, investment slows sharply and Chinese growth is 1.2 percentage points lower on average a year. In such a case, the impact on Asia's economy would be considerably bigger.Read more: <a href="https://www.businessinsider.com/china-housing-market-explainer-cost-debt-wealth-evergrande-impact-2021-9">The Evergrande crisis: 4 questions that explain why China's property market, which is twice as big as America's and where 20% of homes are empty, matters</a>Commodities exporters feel the heatRussia, Norway and South Africa are also likely to be hit by lower Chinese growth, Morgan Stanley said. In this case, the main problem will be that production cuts in China lead to lower demand for global commodities.In 2020, Russia was one of the top two oil suppliers to China, providing 16% of its crude oil, while South Africa is a key industrial metals exporter.Europe's supply links leave it exposedEuropean countries have different exposures to China, meaning a slowdown would have a varying impact. Morgan Stanley said that Germany - which is a net exporter to China - would be one of the most exposed European countries.Investment is also a key area to consider. Germany and France are relatively big investors in China, which could leave them more exposed to a slowdown.Read more: <a href="https://www.businessinsider.com/china-regulatory-crackdown-expert-investors-analysts-2021-8">Big-name investors are navigating China's complex landscape right now by turning to these 10 experts from firms like Muddy Waters and BCA Research</a>US is one of the least exposedAlthough China is one of the US's biggest trading partners, trade doesn't make up a large share of the US economy. For that reason, China's economic wobble is likely to have "limited headwinds" for the US, Morgan Stanley said.Morgan Stanley said that knock-on effects from China's slowdown, such as higher bond yields around the world, could also hit economies. But it said the US would be one of the least affected, especially as it has the Federal Reserve in its corner.

Evergrande and energy shortages are shaking China's economy. Here are the most exposed countries.

<ul class="summary-list"><li>US small-cap stocks suffered in the first COVID wave but are now powering ahead.</li><li>The <keyword id="1742274" type="PERSON" weightage="60" keywordseo="Russell-2000">Russell 2000</keyword> index has jumped more than 10% in 2021 already.</li></ul>The stock market recovery from the coronavirus crash in the spring of 2020 was all about the biggest US names: Amazon, Apple, Facebook, Google, and Netflix.But the smaller, more unloved parts of the stock market come roaring back in the autumn and winter, and their momentum has continued in 2021. The <a href="https://markets.businessinsider.com/index/russell_2000">Russell 2000</a> index of small-capitalization stocks has jumped 1.5%, for example. Small-caps have had "a tremendous rebound," says James Gowen, chief investment officer at Spouting Rock Asset Management in Pennsylvania. He said earnings expectations have "really started to come up."So, can this tremendous rebound continue? There are clouds on the horizon: COVID-19 infections and deaths are still rising around the world, while vaccine rollouts have <a href="https://www.businessinsider.com/operation-warp-speed-vaccine-timeline-states-failure-2021-1">not always gone smoothly</a>.But investors are broadly optimistic that a number of factors can continue to support smaller US shares.<h3><keyword id="99719" type="PERSON" weightage="60" keywordseo="Joe-Biden">Joe Biden</keyword> <keyword id="45304" type="COMPANY" weightage="60" keywordseo="Stimulus">stimulus</keyword> set to boost smaller shares</h3>Small-caps crashed in March when coronavirus first took hold around the world: the Russell 2000 plunged more than 40% from the middle of February to the middle of March.Bigger companies were less badly affected - the S&amp;P 500 fell around 33% in the same period - and then bounced back more sharply as the widespread switch to home-working boosted the tech giants.But things started to shift in November, when positive vaccine trial results led to hopes that the COVID-19 pandemic could soon be curtailed. Suddenly, smaller firms - whose stocks were cheaper - started to look like they could deliver higher returns in 2021 as the economy recovered.Read more: <a href="https://www.businessinsider.com/stock-picks-to-buy-best-profit-growth-reopening-goldman-sachs-2021-1" target="_blank" rel="noopener">GOLDMAN SACHS: Buy these 25 stocks best-positioned to juice profits in 2021 as stimulus and vaccine progress spur economic growth</a>In recent weeks, the <a href="https://www.businessinsider.com/georgia-senate-runoff-election-results-democrats-regain-control-2020-10">victory of Democrats</a> in the Georgia runoff elections has further boosted small-caps, paving the way for Joe Biden to <a href="https://www.businessinsider.com/joe-biden-stimulus-plan-details-checks-congress-direct-payments-unemployment-2021-1">unveil a $1.9 trillion stimulus package</a> on Thursday.This is in large part because the Russell 2000 index of small-caps is "more cyclically biased" than many of the bigger indexes, says Philip Lawlor, head of global investment research at FTSE Russell, which runs the 2000. That is, its stocks are more closely linked to the health of the economy.As of January 8, energy stocks in the Russell 2000 were up a startling 24% in 2021, while basic materials were 8.2% higher and utilities and industrials were up around 6% each. That trend is likely to have continued last week.Gowen says rising growth and inflation, which has been pushing up bond yields, would be helpful to the financial firms that make up around 15% of the index, according to <a href="https://siblisresearch.com/data/russell-sector-weightings/">Siblis research</a>.Analysts at BCA Research said in a note: "More stimulus, a lower dollar and higher inflation breakeven rates will help industrials, materials and financials and hurt tech … These sectoral views favor small-cap equities and value stocks."Lawlor says 2021 could bring a "double whammy" for small-cap shares if the Democrats choose to take a tougher line on the big tech firms.<h3>Investors look through short-term gloom</h3>Yet it won't all be plain sailing. The US, like many countries around the world, is suffering a sharp rise in coronavirus cases. States have introduced new restrictions, hitting businesses.On Thursday, figures showed <a href="https://www.businessinsider.com/us-weekly-jobless-claims-965000-coronavirus-recession-recovery-unemployment-benefits-2021-1?utm_source=markets&amp;utm_medium=ingestgest">new jobless claims jumped to close to 1 million</a> in the previous week, the biggest rise since March.Unveiling his stimulus plan in Wilmington, Delaware, on Thursday, Biden said: "A crisis of deep human suffering is in plain sight, and there's no time to waste."Read more: <a href="https://www.businessinsider.com/stock-market-crash-biggest-bubble-ever-bearish-indicator-sven-henrich-2021-1" target="_blank" rel="noopener">'Extremes are becoming ever more extreme': A Wall Street strategist who sounded the alarm before last year's 35% crash showcases the evidence that a similar meltdown is looming</a>Some scarring on the economy could hit smaller US firms as unemployment rises. And a few analysts are worried that social distancing measures and caution may stick around longer than people think, as vaccines are unlikely to completely eradicate COVID-19.Yet <keyword id="31671" type="CITY" weightage="100" keywordseo="markets">markets</keyword> are hopeful about smaller companies' future earnings, which is their focus. "They're much more concerned about what's going to be happening in 6 months, 9 months, 12 months' time," says Lawler."What I think people are anticipating is the notion that there's going to come a time in 2021 when we start looking at the up-slope of growth and the recovery. And, weighing up the scale of pent-up demand, that could be underestimating the size of the recovery."<h3>Small-caps could benefit from innovation</h3>Gowen argues that the Russell 2000 index is "not just value" stocks. It can also profit from structural shifts in the economy, he says.The pandemic battered many companies, Gowen says. Yet it was also "an incredible tailwind and benefit to a number of businesses where they were well-positioned to take advantage of trends that were already in place but accelerated by COVID."Healthcare and information technology, which make up around 21% and 14% of the Russell 2000 respectively, are key areas, Gowen says."A great example might be consumer-directed healthcare [and] areas like telemedicine."He also cites cloud computing and video conferencing, given that service sector employees "all work at home now."Whatever the opportunities for innovative companies, policymakers - from the President-elect to Federal Reserve officials - this week made it clear that they would keep up economic support."The economy is far from our goals," Fed chair <a href="https://www.businessinsider.com/fed-stimulus-asset-purchases-rates-remain-economic-recovery-jerome-powell-2021-1">Jerome Powell said</a> on Thursday. "We are strongly committed … to using our monetary policy tools until the job is well and truly done."Read more: <a href="https://www.businessinsider.com/bitcoin-investing-strategy-michael-saylor-explains-billion-dollar-crypto-bet-2021-1" target="_blank" rel="noopener">Michael Saylor has invested over $1 billion of MicroStrategy's funds in Bitcoin. The software CEO-turned Bitcoin whale explains why he is making such a massive bet on the digital asset.</a>

US small-cap stocks have raced ahead of their bigger peers in 2021. Experts say a number of factors could send them higher.

<div type="image" title="Angelene Chan_DP Architects" height="1500" width="2000" msid="78278561" hostid="261"></div><ul class="summary-list"><li>DP Architects (DPA) is one of the largest architecture firms in the world. It is the company behind world-famous sites such as Esplanade Theatres by the Bay and The Dubai Mall. </li><li>Angelene Chan, CEO of DPA, recalls the challenges the firm faced, including stop-work orders in <keyword id="34617" type="COMPANY" weightage="60" keywordseo="construction">construction</keyword> sites and travel bans due to COVID-19.</li><li>Post-pandemic, resilient cities and environmental health must go hand-in-hand. Urban spaces will also change to accommodate safe distancing and a predicted rise in self-contained urban clusters.</li></ul>Urban planning in <keyword id="6356662" type="UNKNOWN" weightage="60" keywordseo="singapore">Singapore</keyword> — one of the world's most densely populated cities — calls for a balance of design sensibility, and science. The city's skyline is dotted with projects by DP Architects (DPA), one of the largest architectural practices in Singapore and the world. The firm behind world-famous sites such as Singapore Sports Hub, Esplanade Theatres on the Bay, and The Dubai Mall is no stranger to a challenge. But when COVID-19 came to the shores, it posed an unprecedented set of obstacles, from stop-work orders to travel bans. One of the long-term challenges they faced was the closure of construction sites in Singapore, Angelene Chan, CEO of DPA, said. A project was identified as a COVID-19 cluster; not long after, all construction sites were given stop-work orders.After projects gradually resumed in phase 1 of the reopening in June, new infections among the migrant-worker population and mass quarantine of at-risk workers continue to hamper construction productivity. "As a whole," Chan said, "the construction industry is still trying to find its feet."Construction demand is expected to recover "to some extent" in 2021 according to the Singapore Building and Construction Authority (BCA). As project timelines are lengthy by nature, the industry may take longer to recover, Chan said."At present, we are fortunate that our projects are ongoing, albeit at a slower pace. However, the longer the pandemic goes on, the bigger and longer-lasting the implications on cash-flow and profitability of companies in the entire construction value chain. Recession means shrinking investment, which means [fewer] new projects in the next year," Chan said. <h2>The impact of pandemic travel bans</h2>When the country was in "lockdown," and foreign entries into Singapore was brought to a standstill, did the shortage of labor impact DPA? Perhaps in minor inconveniences - for example, a small number of their employees who commute daily between Singapore and Malaysia were not able to cross the border. The ban on non-essential outbound travel, on the other hand, was more disruptive to their business at the early stage of the virus outbreak. The Singapore headquarters is the "design nerve" of the company's global practice, with more than half of its projects located overseas."This meant that we had to put on hold many scheduled critical meetings and design workshops which delayed project timelines and authority submissions deadlines," Chan said. Even with projects brought to a halt, there was still work to be done. The company rolled out enhanced programs to raise professional competency, increase productivity performance, and build new skillsets for employees, including directors and senior management. "The pandemic has become an impetus for digital literacy," Chan said. Another way to remain resilient is to acquire and develop serious capabilities to become experts in building typology designs. Chan reveals that the company's Typology Research Groups have been <a href="https://issuu.com/dparchitects/docs/designinprint_11.2_issuu-20200703">investigating the shifts in typology designs</a> that are underway because of the pandemic. In August, they held a <a href="https://youtu.be/YKTjgXDGyK8">"designFUTURE" webinar</a> to delve deeper into the subject, as a way to exchange ideas with others in the design and architecture landscape.<h2>A responsible and sustainable future</h2>A post-COVID-19 future for DPA is one that builds and designs responsibly and sustainably. "The pandemic has shown us that our individual action has a far-reaching impact on our planet. Environmental health is very much tied to human health. We cannot talk about building resilient cities and resilient urban life without mitigating climate change and its detrimental effects on all life, including human life," Chan explained. The way people interact with public spaces has also changed. Social distancing is now the new normal, and Singapore's urban and architectural landscape cannot ignore it. "I think we can expect to see more urban decentralization efforts to situate commercial activities and essential services closer to home," Chan predicts. She speaks about self-contained urban neighborhoods with easy access to basic needs. "Creating smaller, inclusive urban clusters will provide a sense of continuity during times of crisis like a pandemic."Chan elaborates that Singapore's plans to be an even greener city, "a city in nature," as a means to provide a better quality of life, will become even more urgent. "We expect to see more open green spaces in neighborhoods, easily accessed from all homes," she said.

Award-winning Singapore Architecture Firm DP Architects on design and urban planning in a post-pandemic world

<div class="KonaFilter image-container float_right click-to-enlarge"><div class="image"><a title_source="BCA Research via Paul Kedrosky" title_caption="" class="zoomin" href="http://static6.businessinsider.com/image/5256f9e869beddaa570b28bc-960/canada-housing.jpg"><img src="http://static6.businessinsider.com/image/5256f9e869beddaa570b28bc-800-1664/canada-housing.jpg?maxX=480" border="0" alt="Canada housing charts" width="480" style="color: #222222; line-height: 22.5px;" /></a><a href="https://twitter.com/pkedrosky/status/388374921325207552/photo/1">BCA Research via Paul Kedrosky</a></div></div>The three charts at right produced by BCA Research are a bit worrisome.
They present three ways of looking at what is arguably a much larger <keyword id="35061" type="ORGANIZATION" weightage="60" keywordseo="housing">housing</keyword> bubble in <keyword id="6356687" type="COUNTRY" weightage="60" keywordseo="canada">Canada</keyword> (relative to the size of its economy) than the one that eventually brought down the United States economy a few years ago.
It's unclear at what point this becomes a problem for Canada, however. Recent data have been fairly strong.
"September sales data suggest the wheels of the Canadian housing market are leaving the tarmac after a brief layover," said BMO chief economist Douglas Porter in a recent note to clients. "September resale transactions surged 64% y/y in Vancouver, 30% in Toronto, 19% in Calgary and 9% in Edmonton. True, sales a year ago were depressed by stricter mortgage rules, but the level of activity is far from weak, with Toronto posting the third best September in the past ten years and 8% above the mean, while Vancouver sales are only 7% below normal for the month ... With interest rates apparently again stuck in a holding pattern, it could well be blue skies ahead for this flight."
Nonetheless, we can't help but agree with Paul Kedrosky, who alerted us to these charts <a href="https://twitter.com/pkedrosky/status/388374921325207552/photo/1">in a tweet</a>, that they are particularly "eye-popping."

Three Charts That Make Us Scared For Canada's Future

<div class="image-container float_right" style="width:305px"><div class="image"><img src="http://static6.businessinsider.com/image/50f82f18eab8ea0f45000020-530-789/screen shot 2013-01-17 at 11.57.32 am.png?maxX=305&amp;maxY=454" border="0" alt="us reliance on income tax" width="305" height="454" /></div><a href="http://bcaresearch.com/">BCA Research</a><keyword id="45031" type="PERSON" weightage="60" keywordseo="Tax">Tax</keyword>es on income, profits and capital gains account for 47% of tax revenue in the U.S. compared with a median 30% in other OECD countries.</div>There are plenty of different ways to look at a country's tax rate.
For instance, if you look at <a href="http://www.businessinsider.com/oecd-tax-revenue-to-gdp-2012-12">tax as a percentage of GDP</a>, the U.S. has a relatively low rate.
However, <a href="http://bcaresearch.com/" target="_blank">BCA Research</a> goes one step further and considers the make up of those tax revenues.
It turns out that the U.S. relies pretty heavily on incomes as a source of tax revenue.
BCA believes this should be addressed when considering tax reform.
"The U.S. tax system is desperately in need of reform. Tax revenues as a share of GDP need to rise, but this should be done by sweeping away all the loopholes and this could even allow marginal rates to come down. Ultimately, a national <keyword id="47069" type="COMPANY" weightage="60" keywordseo="sales-tax">sales tax</keyword> will probably be needed. This would broaden the tax base and reduce the heavy reliance of the U.S. on income taxes. Taxes on income, profits and capital gains account for 47% of tax revenue in the U.S. compared with a median 30% in other OECD countries."
This is not to say that taxes on incomes should come down. Rather, the U.S. should better diversify its sources of revenue.

The US Relies Too Much On Incomes For Tax Revenue

<div style="float: right; margin: 15px 0 20px 20px;"><table border="0" cellspacing="0" cellpadding="0"><tbody><tr><td colspan="2"><a href="https://static-ssl.businessinsider.com/category/chart-of-the-day"> <img src="https://static-ssl.businessinsider.com/image/2237544b39b8324a71969a00/button-more-charts.gif" border="0" alt="button more charts" /></a></td></tr><tr><td><a href="http://www.businessinsider.com/category/chart-of-the-day"><img src="https://static-ssl.businessinsider.com/image/2237544b42b8324a7a969a00/button-chart-prev.gif" border="0" alt="button chart prev" /></a></td><td><a href="http://www.businessinsider.com/thornburgs-real-real-equity-returns-2014-8"><img src="https://static-ssl.businessinsider.com/image/2237544b4db8324a85969a00/button-chart-next.gif" border="0" alt="button chart next" /></a></td></tr></tbody></table></div>Traders and investors around the world are wondering when the U.S. Federal Reserve, the U.K.'s Bank of England, and other big central banks around the world are going to raise interest rates.
For BCA Research's Dhaval Joshi, a better question might be how long those rates will last before they must come down again.
In an August note, which we heard about via <a href="https://twitter.com/CardiffGarcia/status/506876663011872768">FT Alphaville's Cardiff Garcia</a>, Joshi points out that at least four monetary authorities - those of Sweden, the Eurozone, Norway and Australia - have attempted to raise rates following the Great Recession, only to have to lower them once again.
"...With most developed economies (and now many developing economies too) up to their necks in debt, the scope for a further sustained credit expansion is automatically cut off, irrespective of what policymakers desperately try to do," he writes. "The elevated level of debt also means that the ability to absorb higher interest rates is extremely limited. Note that those advanced economies that have tried to raise rates since 2008 have had to reverse course very quickly."
For Sweden, Joshi notes that when the Riksbank started tightening again in 2010, the interest rate couldn't move beyond 2% before the central bank had to rapidly backtrack.
"The volte-face was because the modest 1.75% tightening has had a devastating impact," he says. "The Swedish economy has tipped into outright deflation, and the Riksbank has cut the repo rate back to the zero bound.
"Similarly, in Norway, the central bank tightened by just 1% and then quickly loosened again. Even in Australia - which is relatively immune to the euro area's debt crisis, and which has not seen a recession for 25 years - the Reserve Bank of Australia marched interest rates up by only 1.75% before marching them down again."
Unlike some of its peers, the Fed has kept its benchmark rate unchanged at 0.00-0.25% since December 2008. The last thing it wants to do is raise rates and then immediately reverse course.
<div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/54064757eab8ea3d46bf2afb-1200-900/cotd-rate-hikes.jpg" alt="cotd rate hikes" border="0">BCA</img></div></div></div>

Why Central Banks Have Premature Rate-Hike Anxiety

Well, there it is, the collapse in <keyword id="17408" type="PERSON" weightage="60" keywordseo="infrastructure">infrastructure</keyword> spending that everyone is talking about. It's from BSA Research
<div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="http://static4.businessinsider.com/image/5273932c69bedd4d4cafe9b7-388-481/screen-shot-2013-11-01-at-4.45.59-am.png" border="0" alt="infrastructure spending" />BCA Research</div></div></div>
The chart was first spotted by <a href="http://ftalphaville.ft.com/2013/10/31/1683112/the-collapse-of-us-infrastructure-spending-charted/?">Cardiff Garcia at FT Alphaville</a>.
<a href="http://www.nakedcapitalism.com/2013/11/us-infrastructure-spending-plunges.html">Yves Smith at Naked Capitalism</a> is also writing about it.
The key thing, as Yves notes, is that the chart includes state and local infrastructure spending, which explains why they were was such a furious collapse right after the bust, as state and local governments furiously slashed spending.
The tragedy of course is that with inflation non-existent and a huge surplus of excess labor, this would have made an incredibly good time to spend like crazy on infrastructure, fixing everything and putting people to work.
But there wasn't the political will at the Federal Government (which had the capability to do it), and we've wasted all these years.

Here's The Chart Of The US Infrastructure Spending Collapse That Everyone Is Talking About

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/575724af52bcd01a008c7629-1500/rtr1ect2.jpg" alt="brides race run charge" data-mce-source="Reuters/Brendan McDermid" data-mce-caption="Brides-to-be race in the annual Bridezilla competition in Times Square for a $25,000 dream wedding in New York June 12, 2006." />Reuters/Brendan McDermid</div></div></div>The next housing boom will be triggered by millennials.Like older demographic groups, the lumped-together cohort of 20- and 30-somethings is interested in getting married, starting families, buying homes, and living the aspirational suburban life.The problem is that they are <a href="http://www.businessinsider.com/millennials-are-just-like-everybody-else-2015-12">delaying all this</a>, in part to build careers in large metros.In <a href="http://smeadcap.com/smead-strategies/smead-blog/entries/2016/06/07/the-coming-housing-boom-millennials-in-exile/?utm_source=June+7%2C+2016+-+The+Coming+Housing+Boom%3A+Millennials+in+Exile&amp;utm_campaign=6%2F7%2F16+The+Coming+Housing+Boom&amp;utm_medium=email">a note Tuesday</a>, William Smead, CEO of Smead Capital Management, discussed why this lag among millennials could be responsible for the next housing boom.He wrote that their move into "exile" - away from home and college towns - is only delaying what will eventually be a boost for new home construction.Here's Smead (our emphasis):We would argue that many Millennials have removed themselves from their hometown and their college town via their employment and the lateness of marriage. This contributes directly to Ivy's "elongation." We find it easy to estimate that the current new homebuilding pace of 629,000 units in 2016 will grow to a 1.5 million unit run-rate within five years. This would truly be a boom and could carry the U.S. economy along with it.Numerous studies show that folks under thirty years of age change jobs much more often than prior generations. The average age to marry has risen above 28 years old, with men at 29 in the mix. BCA Research has taught us that American women who have three children are likely to bear more of them in their thirties than in their twenties. The Census Bureau just reported a drop-off in teenage pregnancies and a lower rate of birth for women in their twenties. This was offset by sizable growth in pregnancies between 30 and 45 (Janet Jackson not withstanding).Smead referenced a recent <a href="http://www.barrons.com/articles/ivy-zelman-housing-hazards-and-opportunities-1465024694?mod=BOL_hp_highlight_3">Barron's interview</a> with veteran housing-market analyst <a href="http://www.businessinsider.com/ivy-zelman-on-the-housing-market-in-barrons-2016-6">Ivy Zelman</a>, in which she noted the dire shortage of affordable housing on the market. She said this housing cycle is likely to be longer and flatter than past cycles.And Smead argues that millennials are the reason for this elongation - as they choose to settle and buy houses, that demand should propel the market if homebuilders are able to keep up."We believe that the current fears of a slower economy are the last gasp of a post-financial meltdown era and are about to be replaced by exiles in the US building homes and having families," Smead wrote."This will produce much higher economic growth, spawn higher interest rates and benefit companies with a direct and/or indirect connection to an America, which will be much different in ten years." <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/obama-washington-dc-president-white-house-kalorama-neighborhood-2016-5">Here's the $5.3 million mansion the Obamas will reportedly live in after the White House</a></h3> <div> <div> <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="9jc3ZxMzE6QOCQ6ydkxJ3LsB84vAV-S-" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> <script> if (typeof RunFunctions === 'undefined') { var RunFunctions = []; } RunFunctions.push(function() { var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', '9jc3ZxMzE6QOCQ6ydkxJ3LsB84vAV-S-',{ autoplay: 'false' }); }); </script> <noscript><div>Please enable Javascript to watch this video</div></noscript></div> </div> <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script> </div>

This is what will create the next housing boom

<img class="gwt-Image" src="/photo/48697732.cms" /> When 19-year old <keyword id="2987833" type="UNKNOWN" weightage="100" keywordseo="Harsh-Songra">Harsh Songra</keyword> went to sleep last night, he had no idea what would happen in the next few hours. He had no idea that <a href="http://www.businessinsider.in/searchresult.cms?query=that+Facebook+chief+operating+officer">Facebook chief operating officer</a> (COO) <a href="http://www.businessinsider.in/searchresult.cms?query=Sheryl+Sandberg+">Sheryl Sandberg</a> would publish a post about him and his startup <keyword id="3022261" type="UNKNOWN" weightage="100" keywordseo="My-Child-App">My Child App</keyword>. 
 On Wednesday, Songra was woken up at 2 a.m. by the frequent <keyword id="6354576" type="CITY" weightage="100" keywordseo="Facebook">Facebook</keyword> notifications after Sandberg published a post, where she told the story of Songra and his app as an instance of startups being supported by <a href="http://www.businessinsider.in/searchresult.cms?query=Facebook+">Facebook</a> under its FBStart programme. 
 
The social networking site’s COO posted: "We're supporting developers like Harsh who have great ideas but can't always access the resources they need." 
 
My Child is an <a href="http://www.businessinsider.in/searchresult.cms?query=Android+app+">Android app</a> that tells parents if their child is likely to be suffering from a developmental disorder by processing basic inputs such as the child's height, weight and gender, in just 45 seconds. 
 
Why did Songra develop this app? There is a sad story behind it. It took his parents nine long years to get him diagnosed of having dyspraxia, a developmental disorder. 
 The late diagnosis meant that his parents could do nothing to help. But Songra's father, who was a <keyword id="281728" type="POSITION" weightage="60" keywordseo="hardware-engineer">hardware engineer</keyword>, taught him to use the computer at a young age and he used computer games to overcome the problems of coordination and movement that dyspraxia brings with it. 
 
When he was 16-year-old, Songra was experimenting with algorithms. His drive to do something that will guide parents like his and two years of research helped him build My Child all by himself. The app had seen downloads from across six continents. 
 
His app was launched in January this year. It was built with the help of Facebook's platform Parse and promoted with other tools such as Facebook ads, Hootsuite and Mailchimp. 
 
The Chairman of product council at <a href="http://www.businessinsider.in/searchresult.cms?query=Nasscom">Nasscom</a>, <keyword id="646706" type="PERSON" weightage="60" keywordseo="Ravi-Gururaj">Ravi Gururaj</keyword>, recently got on board as a mentor. 
 He expressed his excitement at Sandberg's post in a Facebook post. Songra, who is pursuing BCA in the <keyword id="916681" type="ORGANIZATION" weightage="60" keywordseo="Bhopal-School-of-Social-Sciences">Bhopal School of Social Sciences</keyword>, said, "Being an entrepreneur means that you lose out on a lot, including your friends. But, when things like this happen, you know that the struggle was worth it." 
 
(Image: echai.in)

What is so special about 19-year-old Harsh Songra? Facebook COO published a post about him

<div class="image-container" style="width:620px"><div class="image"><img src="http://static2.businessinsider.com/image/513512b2ecad04e93e00000d-1436-717/gold-bug.png?maxX=620" border="0" alt="Gold bug" width="620" /></div><a href="http://www.youtube.com/watch?v=e78hni1LoSo">YouTube</a>Caddisfly larva hatching from a golden shell</div>
A notable feature of the investment landscape over the past few months has been the 12 percent drop in the price of <keyword id="18712" type="ENTERTAINMENT" weightage="60" keywordseo="Gold">gold</keyword> since September.
During that time, we've heard some incredibly bearish calls on gold from strategists at <a href="http://www.businessinsider.com/goldman-long-term-gold-call-1200-2013-1">Goldman Sachs</a> and <a href="http://www.businessinsider.com/credit-suisse-the-beginning-of-the-end-of-the-gold-era-2013-2">Credit Suisse</a>, among other shops. Rising real interest rates are said to be the death knell for gold.
Morgan Stanley, which for a while has touted gold as its number-one investment idea in the commodity space, isn't ready to throw in the towel just yet.
In fact, according to the bank's Chief Metals Economist, Peter Richardson, "The reasons for owning gold may be evolving."
What does that mean, exactly? Richardson argues that over the past 10 years, gold has actually undergone numerous evolutions in this manner.
From 2001 to 2008, Richardson writes, gold went up because of "1) a persistent increase in investment demand, 2) acceleration in producer de-hedging, 3) a decline in net official sector sales, and 4) a persistent failure on the part of the mining companies to respond to the incentive of a steadily rising price and materially lift production."
Then, from 2008 to 2012, gold was driven higher by "investors’ waning confidence in the stability of the global financial system and an unprecedented monetary easing by central banks."
In 2011, though, gold became tightly correlated with the trade-weighted U.S. dollar. Richardson attributes this to slowly declining financial stress and less surprises on the central bank liquidity front as time progressed.
"As this has happened, gold has returned to what BCA Research Inc has called its default setting – a tick-for-tick correlation with a range-bound US dollar in TWI terms. In the past, these periods of particularly strong and close correlation with the USD have proven to be consolidation phases before the next upside gold catalyst has appeared," writes Richardson.
The chart below shows this latest "evolution."
<div class="image-container click-to-enlarge" style="width:620px"><div class="image"><a title_source="Bloomberg, Morgan Stanley Research" title_caption="" class="zoomin" href="http://static3.businessinsider.com/image/513501c2eab8ea3b3600000c-960/screen%20shot%202013-03-04%20at%203.17.18%20pm.png"><img src="http://static3.businessinsider.com/image/513501c2eab8ea3b3600000c-806-535/screen%20shot%202013-03-04%20at%203.17.18%20pm.png" border="0" alt="Gold prices versus the trade-weighted dollar" width="620" /></a></div>Bloomberg, Morgan Stanley Research</div>
What happens next?
Morgan Stanley's house view as espoused by Richardson is that "we are about to witness the third installment of the Great Monetary Easing." That's a reference to the extremely loose monetary policy set to hit Japan and the attempts of other countries to not let their currencies strengthen too much in the face of a weaker Japanese yen.
To sum it all up, Richardson concludes, "In these circumstances, we believe that gold has demonstrated considerable technical strength, offers good value at current prices both as an entry level to the trading range between US$1,540/oz and US$1,800/oz and as an option on any remaining upside surprise above this range that might result from the third part of the Great Monetary Easing."
That's why Morgan Stanley remains bullish on gold for now.

MORGAN STANLEY: The Gold Bull Market Isn't Over, And The Reasons To Own It Are 'Evolving'

<div class="image-container float_right" style="width:400px"><div class="image"><img src="http://www.businessinsider.com/image/510978ac69bedd8f07000000/face-recon-marines.jpg?maxX=400" border="0" alt="attached image" width="400" style="color: #000000; font-size: 13px;" /></div><a href="http://www.flickr.com/photos/marine_corps/5372252727/in/set-72157629128681867">via U.S. Marine Corps</a></div>That America is heading toward a tighter fiscal belt is a foregone conclusion. The big question is what this will do to the military.
A lot of that depends on <keyword id="1247550" type="UNKNOWN" weightage="60" keywordseo="Chuck-Hagel">Chuck Hagel</keyword>, who, despite a <a href="http://www.businessinsider.com/chart-chuck-hagel-military-budget2013-1">testy nomination process</a>, is <a href="http://www.businessinsider.com/chuck-hagel-likely-to-get-approved-2013-1">likely to be confirmed</a> as the new secretary of <keyword id="6354810" type="ORGANIZATION" weightage="100" keywordseo="Defense">defense</keyword>.
William Galston of The New Republic knocked one out of the park with his analysis, titled "<a href="http://www.newrepublic.com/article/112274/forget-iran-chuck-hagels-toughest-fight-will-be-pentagons-budge">Forget Iran—Chuck Hagel's toughest fight will be the Pentagon's budget</a>."
From the post:
If Hagel gets the nod, he will have to recommend major strategic choices in the face of the Pentagon's budget constraints.
The bet on both sides of the aisle is that sequestration will become operative at the beginning of March. On top of the budget caps, it would reduce defense spending in 2022 to $605 billion—more than $100 billion below what would be needed to maintain the purchasing power of the military budget at 2013 levels. Just this year, military leaders would have to cut $60 billion from pre-BCA levels, more than 10 percent of projected expenditures. And they would have to cram those cuts into the remaining six months of the fiscal year. That’s the planning horizon that Chuck Hagel would face.
Defense spending typically drops following a war (or two), but this is unprecedented.
So what's going to get cut?
Research and development budgets will shrink, but this may just lead to massive defense corporations controlling purse strings more carefully. Cuts will likely cinch up reckless, <a href="http://www.businessinsider.com/littoral-combat-ship-has-640-equipment-failures-2012-4#comments">costly</a>, <a href="http://www.businessinsider.com/britain-unveils-new-stealth-combat-ship-will-cost-almost-half-the-us-littoral-combat-ship-2012-8">overpriced embarrassments</a> like the Navy's Littoral Combat Ship, which, consequently, <a href="http://www.wired.com/dangerroom/2013/01/littoral-combat-ship/">won't even survive</a> in combat.
Expect Hagel and other planners to come in and pretty much cancel programs that aren't relevant in today's warfare (no reason to shoot tank rounds at rural insurgents). Though America won't get rid of tanks altogether, it may stop building them.
Hagel must also balance the reshaping with the realities of ongoing American security operations.
Indeed the U.S. is shrinking its military out of both fiscal and strategic necessity.
If there's one thing America's realized in the last 11-12 years, it's that massive land engagements are no longer in the interest of national security. The future looks to be focused on small counterinsurgency and training missions, <a href="http://www.shadowspear.com/special-operations-news/106261-special-operations-in-africa.html">like in Africa</a>, rather than another Afghanistan.
Hagel is the perfect man for the job in this respect, as he said in his confirmation prepared statements, "Committing our troops to any military operation is a grave decision, and one I, if confirmed, would make carefully and cautiously.” 
His last wish is to order a massive invasion of another country — but training foreign troops to provide their own security, that's another issue entirely.
Other, more relevant programs will see a boost, but not one reciprocal to proposed cuts. Look <a href="http://www.defensenews.com/article/20120403/DEFREG02/304030002/SOCOM-Eyes-Eventual-Boost-R-D-Funding">for modest increases</a> in special operations scope and possibly personnel, regardless of cuts.
Nonetheless, the force will stay global: Naval and Air Force assets essential to global coverage will likely remain intact, like Ohio Class Submarines, drones, and <a href="http://www.businessinsider.com/chuck-hagel-senate-confirmation-hearing-2013-1">the new</a> Cyber Command.
It's the personnel who will suffer. Layoffs at manufacturing plants (already happening) for <a href="http://www.americanprogress.org/issues/military/report/2012/12/06/47106/hundred-billion-in-politically-feasible-defense-cuts-for-a-budget-deal/">nonessential weapons</a> (like the M1-Abrams tank), possible base closings, and definitely cuts to active duty personnel (the Corps is looking to drop 20K).
<a href="http://www.businessinsider.com/defense-spending-fell-at-the-fastest-rate-in-40-years-2013-1">Big declines in defense spending</a>, largely in part, caused US GDP to shrink 0.1 percent on Wednesday, but there's no reason to panic about the economy or security.
No, the military should be a reflection of current security needs. With two major wars winding down and a growing necessity for 'dark' operations, the face of the U.S. Military will look a little thinner, with greater emphasis on finesse rather than force.
SEE ALSO: <a href="http://www.businessinsider.com/jon-stewart-drones-interview-video-2013-1">Jon Stewart bombed a big interview on drones &gt;</a>
SEE ALSO: <a href="http://www.facebook.com/bidefense">The Military &amp; Defense Facebook page for updates &gt;</a>

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