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Indian economy is not growing at the expected rate. The current rate of 7.4% <keyword id="35050" type="CITY" weightage="20" keywordseo="gdp">GDP</keyword> growth for Q2 of 2015-16 seems rosy on the surface, but in fact the picture is not that rosy as the real GDP figure includes GDP deflator of -1.4% reducing nominal GDP to 6.0% . 
 
EXPLAINED: Why it's not such a rosy picture 
 India’s <keyword id="6355302" type="ORGANIZATION" weightage="20" keywordseo="Rupee">rupee</keyword> is the second-worst performer among Asia’s most widely traded currencies over the past month, and the country’s benchmark stock index has fallen about 4% since the beginning of the year . If GDP continues to show sluggish growth rate like this, it might not be possible for Indian economy to reduce the <keyword id="6365485" type="UNKNOWN" weightage="20" keywordseo="fiscal-deficit">fiscal deficit</keyword> and our FM may be forced to pace onto austerity; targeted at reducing the fiscal deficit at a time of weakening nominal growth, soft revenues, slumping export demand and negative IIP . However, it is the right time to pounce on the opportunities and revive the industries by boosting up demand and increase private investment when oil prices, one of the major import expenses for India, are at a record low level. 
 
Here are the underlying causes: 
 
We have identified the following causes for less than expected GDP growth rate: [GDP = C+I+G+NX] 
 
i) Because of unpredictable monsoons, the farms can’t get proper irrigation resulting into low agriculture yield, hence less disposable income for farmers who constitute (56.6% ) of total workforce. This in turn results into less consumption demand or idle capacities for industries. Industries don’t perceive any incentive to add capacity leading to less employment opportunities for the 1 million workforce being added annually to the economy. 
 
ii) The 30% corporate tax rate is quite discouraging for attracting private investment when we compare it to other emerging economies. Also lack of proper infrastructure is becoming a major hindrance in encouraging foreign investments. 
 
iii) The large amount of non-performing assets (NPAs) lying with national banks are limiting credit risk taking capacity of banks resulting into non-availability of loans for small and medium scale enterprises. 
 
Some <keyword id="3263904" type="UNKNOWN" weightage="20" keywordseo="Fiscal-prudent-recommendations">Fiscal prudent recommendations</keyword>: 
 We have come up with the following four recommendations. The first recommendation viz. revival of agriculture sector will increase consumption while the other three will drive investment as planned expenditure for any economy is a function of consumption and investment. All of these will cause the IS curve to shift outwards i.e. towards right resulting in increased equilibrium production. Although it will result in higher <keyword id="6371181" type="UNKNOWN" weightage="20" keywordseo="interest-rates">interest rates</keyword>, it can be taken care with complementary monetary policy. 
 
i) Revival of agriculture sector: We suggest allocation of a significant portion of upcoming budget for agriculture sector towards development of irrigation facilities and other agriculture related infrastructures viz. roads and fair price markets. In 2015-16 budget, allocation to agriculture was reduced by 14.3% compared to budget estimate in 2014-15. However it is the need of time to revitalize the sector and drive consumption demand with industries producing under capacity and tractors sales plummeting (a sign of concern). 
 
ii) Investment in infrastructure: Investment in infrastructure will incentivize foreign &amp; local investment and will boost Digital India, Make in India (such as device manufacturing) &amp; Incredible India (tourism) initiatives as well. With NHAI suffering with legal issues worth 25000 crore , it is pressing time for reforms and allocation to settle these legal issues, give impetus for more construction projects and at the same time invest into Railways to bring more connecting trains in far-flung areas so that they can be linked to mainstream economy. These efforts will also generate lots of jobs at many skill levels. 
 
iii) Corporate tax rate cut: A decrease in corporate tax rate from current 30% to say 25% will decrease the corporate glut and will incentivize them to re-invest their savings. It will also attract private investors and investment by foreign institutional and direct investors. A decrease in corporate tax followed by a decrease in personal tax for income more than 10 lakh per annum will drive personal savings and hence investment. Although a cut in corporate tax rate to attract investments will decrease government revenues in short-term but in long-term it will result into a win-win situation by increase in the volume of overall tax collection. 
 
iv) Revival of national banks: Most of the national banks are facing pressing issues of distressed assets (a whopping 11%) as most of the infrastructure projects got stalled. Government should aim at invigorating this crucial sector by adopting measures to take care of such projects (Selling or reviving). This will enhance the credit-risk taking capability of banks thus prompting them to make credits available for small and medium scale businesses hence promoting growth of SMEs. 
 
Thus, it his highly recommended and expected from Team Modi to deliver a budget focusing on structural reforms and truly strive towards ‘Acche Din’ otherwise the economy may fall prey to slow down across the globe. 
 
(The article has been authored by Manish Pandey, a student of IIM Bangalore. Having graduated from NIT Allahabad, Manish has worked close to 3 years for a top IT firm. He has keen interest in film-making, <keyword id="107737" type="ORGANIZATION" weightage="20" keywordseo="Entrepreneurship">entrepreneurship</keyword> and the supporting ecosystem and is a part of a web based startup of rating &amp; reviewing movies -mymovierack.com) 
 
DISCLAIMER - The below article is an individual’s views and does not represent the institute's sentiment

An advice: Team Modi, focus on structural reforms if you don't want India to feel the global slowdown heat

<ul><li><keyword id="6376684" type="General" weightage="20" keywordseo="nykaa" source="Orion">Nykaa</keyword> was able to increase its revenue by ₹1,300 crore in the fiscal year 2022.</li><li>ICICI Securities anticipates much higher competition for Nykaa in the time to come.</li><li>The brokerage recommends investors to hold on to the stock.</li></ul>Even though Falguni Nayar-led ecommerce titan Nykaa was able to grow its revenue by ₹1,300 crore in FY22, brokerage firm ICICI Securities believes that it is not the right time for retail investors to buy more shares. On the other hand, it isn’t a stock to get rid of either. The brokerage firm raised its target price from ₹1,250 to ₹1,300, while maintaining its ‘Hold’ rating. Nykaa’s shares were trading higher than this target – at ₹1,370 at 10:13 am on Monday, after a marginal rise in the early morning trade. <div type="image" title="Nykaa to face competitive heat but its omni-channel experience maybe the game changer" msid="91883914" hostid="261"></div> <cmsannotation type="cmsannotation" annotationid="Nykaa’s top spot might be in danger" comment="subhead" text="Nykaa’s top spot might be in danger">Nykaa’s top spot might be in danger</cmsannotation> Nykaa’s revenues for the fourth quarter of FY22 were in line with analyst estimates. Yet, competition in the segment is likely to intensify over time. “That said, competition will likely intensify from both vertical and horizontal peers. While we expect BPC [beauty and personal care] revenues to grow, we believe Nykaa’s journey could be different – it will have to go more mainstream to drive this growth (tougher decisions about brand stretch along the way),” ICICI Securities said in their latest report. Apart from traditional players like Amazon, Flipkart and Meesho that sell everything from clothes and cosmetics to groceries to items in the home category, Nykaa also competes with businesses like Purplle that work in the same domain as the company. Purplle is currently valued at over <a href="https://www.businessinsider.in/business/startups/news/nykaas-rival-purplle-raises-38-million-from-pantaloons-ceo-sequoia/articleshow/88953104.cms#:~:text=Business%20Insider%20has%20reached%20out,a%20valuation%20of%20%24500%20million.">$700 million</a>. In the short term, the company also faces the risk of a bad consumer sentiment which can affect discretionary spending - that can impact demand. <div type="image" title="Nykaa to face competitive heat but its omni-channel experience maybe the game changer" msid="91883945" hostid="261"></div> <cmsannotation type="cmsannotation" annotationid="‘Nykaa’s strengths can’t be replicated easily’" comment="subhead" text="‘Nykaa’s strengths can’t be replicated easily’">‘Nykaa’s strengths can’t be replicated easily’</cmsannotation> The long-term prospects for the company are good. ICICI Securities highlighted that Nykaa is currently functioning in a golden spot with three aspects working in its favour. First, it continues to be the largest beauty and personal care business in India. Second, it has a good profitability metric and prudent capital allocations. Three, it is omni-channel in a true sense. “Its strength of content-driven and inventory-driven models in BPC will continue to be key differentiators – the former is a long-drawn journey and cannot be built by a new entrant just on the strength of capital,” the report added. Nykaa reported a revenue of ₹3,774 crore for FY22, representing an increase of about ₹1,300 crore. Its net profit, however, declined by ₹20 crore during the same time frame. As per ICICI estimates, its revenues could touch a billion dollars in the next two years. In the same time frame, its profits might also grow proportionately, as per the report. <div type="image" title="Nykaa to face competitive heat but its omni-channel experience maybe the game changer" msid="91883950" hostid="261"></div> SEE ALSO <a class="tout-title-link" href="https://www.businessinsider.in/cryptocurrency/news/indian-government-looking-for-ways-to-tax-nfts-as-per-a-new-report/articleshow/91882530.cms" style="">After cryptos, the taxman could come for your NFTs says a new report</a> <a href="https://www.businessinsider.in/policy/news/government-withdraws-advisory-on-aadhaar-photocopies-asks-citizens-to-be-cautious-while-sharing-aadhaar-card-details/articleshow/91881948.cms" style="">Government withdraws advisory on Aadhaar photocopies, asks citizens to be cautious while sharing Aadhaar card details</a> <a href="https://www.businessinsider.in/careers/news/how-to-apply-isro-free-online-course-and-check-out-eligibility-criteria/articleshow/91831777.cms" style="">ISRO announces free online course for students above 10 years – eligibility, how to apply and everything you need to know</a>

Nykaa to face competitive heat but its omni-channel experience maybe the game changer

<ul class="summary-list"><li><keyword id="1376707" type="PERSON" weightage="60" keywordseo="Paul-Tudor-Jones">Paul Tudor Jones</keyword> praised <keyword id="6354947" type="UNKNOWN" weightage="60" keywordseo="bitcoin">bitcoin</keyword> and warned about rising inflation.</li><li>The billionaire investor sounded the alarm on the "Buffett indicator" hitting record highs.</li><li>Jones suggested retail investors could flock to commodities and send their prices skyward.</li></ul>Billionaire investor Paul Tudor Jones trumpeted bitcoin, expressed concern about the <a href="https://markets.businessinsider.com/news/stocks/warren-buffett-indicator-200-percent-stocks-overpriced-market-crash-2021-6-1030486280">"Buffett indicator"</a> hitting record highs, and called on the <keyword id="6355253" type="UNKNOWN" weightage="60" keywordseo="federal-reserve">Federal Reserve</keyword> to <a href="https://markets.businessinsider.com/news/stocks/paul-tudor-jones-inflation-federal-reserve-prices-consumer-bitcoin-hedge-2021-6-1030520679">take inflation seriously</a> in a <a href="https://www.cnbc.com/video/2021/06/14/pro-full-interview-with-billionaire-investor-paul-tudor-jones-on-markets-bitcoin-and-more.html">CNBC interview</a> this week.The Tudor Investment Corporation founder also raised the prospect of a retail-fueled commodity boom, recommended stricter margin limits on investors, and voiced his support for higher <keyword id="6368033" type="UNKNOWN" weightage="60" keywordseo="taxes">taxes</keyword> on America's wealthiest people.<h2>Here are Jones' 10 best quotes from the interview, lightly edited and condensed for clarity:</h2>1. "I get nervous from a financial-instability standpoint when the stock market is 220% of GDP. I get nervous when that number is 45% higher than in the 2000 bubble, and 90% higher than at the 2007 top." - referring to Warren Buffett's namesake gauge, which compares the stock market's total value to the size of the economy.2. "When you look at the Fed today and the Fed in 2013, you wonder how you can have such wildly different policy views on what constitutes the right levels for employment, the right levels for inflation. It's almost like a split personality."3. "We're going to be where we were pre-pandemic by October. And yet we are quantitative easing and juicing an economy that's already red-hot." - warning that the Fed is stimulating the economy even though the surplus of job offers to unemployment claims is on track to hit January 2020 levels in the next four months.4. "You've got the craziest mix of fiscal and monetary policy. It goes against all traditional economic orthodoxy. Things are absolutely bats--- crazy." - suggesting that the government throwing out the rulebook may have paved the way for the Capitol insurrection and the meme-stock and SPAC booms.5. "If the Fed treats rising inflation with nonchalance, then it's a green light to go all-in on the inflation trades. I'd probably buy commodities, buy crypto, buy gold." Read more: <a href="https://www.businessinsider.com/investing-strategies-for-stocks-and-commodities-during-recovery-ubs-2021-6">The world's largest wealth manager is telling investors 4 ways to bet on accelerating economic growth - and the perfect way to play each theme</a>6. "If the Reddit crowd ever gets into commodities, God forbid. Commodities are generally finite-supply, small <keyword id="31671" type="CITY" weightage="100" keywordseo="markets">markets</keyword>. If we ever got retail investors actually nervous about inflation, those things can double or triple with no problem whatsoever."7. "If I was Fed chair, I would have raised margin requirements two years ago. I would have said, 'Okay, we're gonna experiment with an unproven, untried, negative-real-rate economic program that is going to encourage a lot of leverage. We want asset prices to rise, we want you to take risks, we want to extend duration, but you need to be prudent in how you use your leverage and what you invest in."8. "Bitcoin is math and math has been around for thousands of years. I like the idea of investing in something that's reliable, consistent, honest, and 100% certain."9. "<a href="https://www.businessinsider.com/bitcoin-outlook-substantially-higher-paul-tudor-jones-cryptocurrencies-adoption-globally-2020-12?amp">I like bitcoin</a> as a portfolio diversifier and store of wealth. I want to have 5% in gold, 5% in bitcoin, 5% in cash, 5% in commodities. I don't know what I want to do with the other 80% at this point in time. I want to wait and see what the Fed's gonna do."10. "It's really difficult. You cannot tax unrealized capital gains because of the volatility. But should the top 1% pay more? Absolutely." - commenting on the <a href="https://www.businessinsider.com/american-billionaires-tax-avoidance-income-wealth-borrow-money-propublica-2021-6">ProPublica report</a> that found billionaires were paying little federal income tax relative to their net worth.

Billionaire investor Paul Tudor Jones praises bitcoin, warns of rising inflation, and flags the 'Buffett indicator' in a new interview. Here are the 10 best quotes.

Hello!Welcome to this weekly roundup of stories from Matt Turner, Insider's co-Editor in Chief of <keyword id="6355515" type="UNKNOWN" weightage="60" keywordseo="business" source="Orion">business</keyword>. <a href="http://newsletter.businessinsider.com/join/4np/insider-weekly">Subscribe here to get this newsletter in your inbox every Sunday.</a> Plus, download Insider's app for news on the go - <a href="https://apps.apple.com/app/apple-store/id554260576?mt=8">click here for iOS</a> and <a href="https://play.google.com/store/apps/details?id=com.freerange360.mpp.businessinsider">here for Android</a>.What we're going over today:<ul><li>A new generation of leaders is <a href="https://www.businessinsider.com/30-leaders-under-40-changing-healthcare-in-2021">transforming the healthcare industry.</a></li><li>Cloud software's<a href="https://www.businessinsider.com/cloud-honeymoon-over-for-amazon-microsoft-helps-oracle-cisco-vmware-2021-8"> time in the spotlight may be waning</a>.</li><li>Gap's sales are up - and the retailer is poised to<a href="https://www.businessinsider.com/gap-making-comeback-with-marketing-and-products-2021-8"> cash in on its comeback.</a></li><li>You're not alone - there's a reason why <a href="https://www.businessinsider.com/working-from-home-made-us-all-paranoid-stressed-2021-8">working from home makes a lot of people paranoid</a>.</li></ul><a href="https://www.businessinsider.com/30-leaders-under-40-changing-healthcare-in-2021"></a>What's trending this morning:<ul><li>Over 300 Amazon staffers joined a Slack channel to criticize the company. Here's what workers are <a href="https://www.businessinsider.com/amazon-employees-slam-performance-reviews-pip-on-internal-slack-channel-2021-8">saying about its opaque performance-review system</a>. </li><li>There's over 60 key players leading Travis Kalanick's top secret startup CloudKitchens - but it's so hush-hush <a href="https://www.businessinsider.com/inside-cloudkitchens-key-executives-and-recent-departures-2021-7">they can't even add it to their resumes</a>.</li><li>Salesforce and Zoom were vying for the same mega-acquisition of Five9. This means we may know <a href="https://www.businessinsider.com/salesforce-five9-zoom-rbc-contact-center-tools-acquisitions-2021-8">what the $242 billion cloud giant could buy next</a>.</li><li>Google is shutting down its health division. <a href="https://www.businessinsider.com/google-health-shutting-down-david-feinberg-leaves-2021-8">Find out what Insider learned in a leaked memo.</a></li><li>Real-estate investors can tap into these new rankings of the <a href="https://www.businessinsider.com/where-to-buy-vacation-home-for-best-return-on-investment-2021-8">best areas to buy vacation rental properties right now.</a></li></ul><h3><a href="https://www.businessinsider.com/30-leaders-under-40-changing-healthcare-in-2021">The new leaders transforming the healthcare industry</a></h3>There's an elite group of doctors, scientists, executives, and founders who are rethinking and improving how we keep people healthy. Out of hundreds of nominations, these are <a href="https://www.businessinsider.com/30-leaders-under-40-changing-healthcare-in-2021">Insider's 30 under 40 set to revamp healthcare </a>- and here's a look at one of the featured leaders:Dr. Nworah Ayogu, 33, is defining the future of Amazon Pharmacy By the time Nworah Ayogu got his medical degree from Harvard University in 2015, he'd researched vaccines for brain tumors, helped stand up his hometown's first office of minority health, and codeveloped a service for infant care via text messages in Cape Town, South Africa.With an MBA also in hand, he went into residency at Columbia University already well acquainted with the limitations of medical care. Then, in 2017, he joined Cityblock Health, a tech-oriented health startup that cares for vulnerable populations.See the full list here:<ul><li><a href="https://www.businessinsider.com/30-leaders-under-40-changing-healthcare-in-2021">Meet the 30 young leaders forging a new future for the healthcare industry in 2021</a></li></ul>Also read:<ul><li><a href="https://www.businessinsider.com/apple-scaling-back-healthhabit-app-layoffs-2021-8">Apple is scaling back a key health project that grew out of its care clinics, and some workers could lose their jobs</a></li><li><a href="https://www.businessinsider.com/top-anthem-exec-explains-the-health-insurers-approach-to-primary-care-2021-8">A top Anthem exec explains why the $92 billion health-insurance giant is betting on a different primary-care strategy than rivals UnitedHealth and Humana</a></li></ul><h3><a href="https://www.businessinsider.com/cloud-honeymoon-over-for-amazon-microsoft-helps-oracle-cisco-vmware-2021-8">The honeymoon and hype may be over for cloud software </a></h3><a href="https://www.businessinsider.com/cloud-honeymoon-over-for-amazon-microsoft-helps-oracle-cisco-vmware-2021-8"><div type="image" title="Andy Jassy" height="1753" width="2334" msid="85535643" hostid="261"></div></a>Cloud customers are getting more cautious when approaching services like Amazon Web Services and Google Cloud. <a href="https://www.businessinsider.com/cloud-honeymoon-over-for-amazon-microsoft-helps-oracle-cisco-vmware-2021-8">A growing number of VCs and Wall Street firms</a> have cooled on restructuring their information technology and willingness to front the costs:<a href="https://www.businessinsider.com/amazon-earnings-q2-2021-revenue-eps-profit-2021-7">AWS</a>, the market leader, is on track to bring in $59 billion in revenue this year after posting growth of 37% over the previous quarter, and <a href="https://www.businessinsider.com/google-alphabet-earnings-q2-2021-revenue-eps-profit-analysis-2021-7">Google Cloud</a> had $4.6 billion in revenue last quarter, up 54% year over year. The numbers are impressive given that the <a href="https://www.businessinsider.com/microsoft-azure-amazon-web-services-cloud-slowdown-2019-10">clouds have at times struggled to show growth as their businesses mature</a>. In other words, while cloud is still a booming sector and will likely remain that way for some time to come, its hype may be wearing off as customers reassess the costs and benefits of restructuring their information technology. And that dynamic could create an opening for old-guard companies like <a href="https://www.businessinsider.com/category/cisco">Cisco</a>, <a href="https://www.businessinsider.com/category/oracle">Oracle</a>, and <a href="https://www.businessinsider.com/category/vmware">VMware</a>, whose data-center-focused products - not long ago written off as irrelevant because of cloud's dominance - seem more vital than ever. Read the full story here:<ul><li><a href="https://www.businessinsider.com/cloud-honeymoon-over-for-amazon-microsoft-helps-oracle-cisco-vmware-2021-8">The honeymoon is over for cloud computing</a></li></ul>Also read:<ul><li><a href="https://www.businessinsider.com/former-aws-exec-why-amazon-built-cloud-cost-management-tools-2021-8">A former Amazon manager explains how AWS first realized surprise cloud bills were a problem for its customers</a></li><li><a href="https://www.businessinsider.com/google-pay-payments-team-seeing-executive-exodus-turnover-caesar-sengupta-2021-8">Google's payments team is seeing an exodus of executives and employees. Some say they're frustrated with the slow pace of progress.</a></li></ul><h3><a href="https://www.businessinsider.com/gap-making-comeback-with-marketing-and-products-2021-8">The Gap comeback begins now</a></h3><a href="https://www.businessinsider.com/gap-making-comeback-with-marketing-and-products-2021-8"><div type="image" title="A Gap employee packs shopping in a bag while a customer pays" height="1869" width="2492" msid="85535644" hostid="261"></div></a>The once-iconic American retailer Gap has been in decline for decades. But its revenue rose dramatically year-over-year during the pandemic, which its CEO attributed partially to new marketing campaigns. Social media buzz and influencer hype may also helped, <a href="https://www.businessinsider.com/gap-making-comeback-with-marketing-and-products-2021-8">as well as activist marketing campaigns and revamped products</a>: The onetime American mall mainstay has been shutting physical stores for years, and plans to close more than 350 Gap and Banana Republic stores in North America by 2023. It's instead making a bigger bet on e-commerce. Gap is working to improve its mobile experience and email <a href="https://www.prnewswire.com/news-releases/gap-inc-taps-deg-as-its-global-email-agency-of-record-301074052.html">personalization</a> to drive sales. And it just launched <a href="https://www.marketingdive.com/news/gap-inc-further-streamlines-loyalty-across-brands/603800/">a loyalty program</a> to get people to <a href="https://www.retaildive.com/news/gap-inc-bright-rewards-members-spend-more-more-often/559240/">spend more across Gap Inc. brands.</a>Gap's reset coincided with the pandemic, when people were seeking<a href="https://www.nytimes.com/interactive/2020/08/06/magazine/fashion-sweatpants.html"> casual attire</a> and <a href="https://www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-cb-brand-power-in-times-of-covid-19.pdf">longstanding brands,</a> said Jason Goldberg chief commerce strategy officer at Publicis North America. E-commerce sales have helped offset in-store declines, <a href="https://www.marketingdive.com/news/gap-says-marketing-investments-are-supercharging-sales/600998/">growing 82%</a> in the first quarter. It's seeking more collaborations like its deal with Kanye West's <a href="https://www.refinery29.com/en-us/2020/06/9885588/kanye-west-yeezy-gap-collaboration">Yeezy</a>, which <a href="https://footwearnews.com/2021/business/earnings/gap-closing-uk-stores-kanye-yeezy-1203155597/">Wells Fargo</a> estimated could drive up to $990 million in incremental sales in fiscal 2022.Get the details on Gap's comeback:<ul><li><a href="https://www.businessinsider.com/gap-making-comeback-with-marketing-and-products-2021-8">Gap's sales are up for the first time in decades. Here's how the retailer is trying to cash in on the momentum by revamping its marketing and products.</a></li></ul>Also read:<ul><li><a href="https://www.businessinsider.com/stitch-fix-stylists-speak-out-about-policy-changes-2021-8">In leaked internal messages, Stitch Fix stylists say corporate is 'gaslighting' them and ignoring pleas for help on new policies and schedules</a></li><li><a href="https://www.businessinsider.com/wedding-advertising-is-coming-back-davids-zola-tiffany-2021-7">Brands like David's Bridal and Zola are spending big on advertising as the $51 billion wedding industry surges</a></li></ul><h3><a href="https://www.businessinsider.com/working-from-home-made-us-all-paranoid-stressed-2021-8">Work-from-home paranoia is a real thing </a></h3><a href="https://www.businessinsider.com/working-from-home-made-us-all-paranoid-stressed-2021-8"><div type="image" title="working from home" height="750" width="1000" msid="85535645" hostid="261"></div></a>Research suggests that the loneliness of working from home can seep into feelings of vulnerability and paranoia, like the idea that coworkers and bosses could be chatting behind your back on private Slack channels. Navigating paranoia <a href="https://www.businessinsider.com/working-from-home-made-us-all-paranoid-stressed-2021-8">starts with getting out of your own head</a>:Paranoia at work isn't necessarily a bad thing. Stanford's Roderick Kramer <a href="https://pubmed.ncbi.nlm.nih.gov/12140855/">showed</a> it can be a reasonable and appropriate response to a threat. He coined the term "prudent paranoia" to refer to a certain kind of attentiveness whereby being suspicious of others' underlying motivations serves as a form of emotional intelligence and covert information gathering. Being "prudently paranoid" might give you an advantage in grasping social dynamics and predicting future outcomes. Problems occur when the paranoia becomes pathological - when you start reading into things that aren't there. Vanessa Bohns, a social psychologist and professor of organizational behavior at Cornell University, recommended getting off Slack. It's rife with opportunities for miscommunication, she said.Dig into WFH paranoia: <ul><li><a href="https://www.businessinsider.com/working-from-home-made-us-all-paranoid-stressed-2021-8">Working from home has made us all paranoid </a>Also Read:</li><li><a href="https://www.businessinsider.com/7-side-hustles-that-will-earn-6-figures-or-more-2019-12">The 24 best side hustles that could earn you 6 figures or more, and how to get them off the ground quickly from experts who have done it</a></li><li><a href="https://www.businessinsider.com/5-clues-to-look-for-in-job-descriptions-about-a-companys-culture-2021-8">5 ways to read a job description for clues into a future employer's culture</a></li></ul>Finally, here are some headlines you might have missed last week.- Matt <ul><li><a href="https://www.businessinsider.com/silicon-valley-broken-out-of-truly-transformative-tech-ideas-2021-7">Silicon Valley is falling apart - force feeding us lazy and derivative tech</a></li><li><a href="https://www.businessinsider.com/poshmark-reseller-college-student-daily-routine-side-hustle-2021-8">I'm a 20-year-old college student selling $34K on Poshmark. Here's the daily routine I follow to juggle resale and school.</a></li><li><a href="https://www.businessinsider.com/remote-bitcoin-mining-expert-compass-crypto-investing-strategy-adam-gitzes-2021-8">Adam Gitzes earns around $190 a day from remote bitcoin mining as a side hustle. He shares 2 reasons why it's 'a great time' to start - and his tips for finding success with it</a></li><li><a href="https://www.businessinsider.com/how-tiger-global-eclipsed-softbank-to-become-a-global-behemoth-2021-8">Hedge fund Tiger Global is blowing up the unwritten rules of startup investing right now with its speed, tons of cash, and hands-off approach</a></li><li><a href="https://www.businessinsider.com/amazon-employees-blast-the-companys-return-to-office-plans-2021-8">'This is turning into a circus': Amazon employees blast the company's latest return-to-office plans internally, calling for permanent remote work</a></li><li><a href="https://www.businessinsider.com/tv-tech-companies-that-could-replace-nielsen-2021-8">TV companies are at a boiling point with Nielsen over how it counts viewers and some are ready to move on. Here are 6 companies that could replace it.</a></li><li><a href="https://www.businessinsider.com/real-estate-investing-strategies-passive-income-2021-8">Maximize passive income from real estate investments with 3 easy strategies</a></li></ul>

The 30 young leaders, scientists, doctors, and entrepreneurs transforming the healthcare industry

<div class="KonaFilter image-container display-table"><div><div class="image on-image"><a href="https://upload.wikimedia.org/wikipedia/commons/6/60/Explosion-proof-light-SEGS23C2K-warning-light-02-big.jpg">Wikimedia Commons</a>Flashing red lights.</div></div></div><ul><li>As concerns of a slowdown in global growth swirl, some experts on Wall Street are suggesting investors bulk up on defensive holdings.</li><li>Goldman Sachs just told clients to "increase portfolio defensiveness," and Bank of America said investors' exposure to "low quality" stocks is a key risk this year.</li><li>The calls come amid continued <a href="https://www.businessinsider.com/stock-markets-news-china-markets-rally-on-trump-trade-talk-optimism-2019-1?r=UK&amp;IR=T">US-China trade negotiations</a>, central banks around the world unwinding fiscal stimulus, and <a href="https://www.businessinsider.com/bank-of-england-interest-rate-decision-2018-12">continued Brexit uncertainty</a>.</li></ul>Economists and strategists on Wall Street are increasingly asking not if, but when, a slowing global economy will accelerate into a <a href="https://markets.businessinsider.com/news/stocks/global-economy-heading-toward-downturn-nomura-2018-12-1027836714?utm_campaign=browser_notification&amp;utm_source=desktop">more severe downturn</a>.Amid calls for <a href="https://markets.businessinsider.com/news/stocks/apple-sounds-the-alarm-of-a-slowdown-in-china-2019-1-1027841223?">slowdowns in major economies</a>, along with lingering political uncertainty, and central banks unwinding accommodative monetary policy, some macroeconomic experts are recommending that investors bulk up on defensive assets.Investors are gearing up to deal with volatility-inducing events like ongoing <a href="https://www.businessinsider.com/stock-markets-news-china-markets-rally-on-trump-trade-talk-optimism-2019-1">trade negotiations</a> between the US and China, the Federal Reserve potentially <a href="https://www.businessinsider.com/r-traders-see-fed-cutting-rates-not-raising-them-in-2020-2018-12">scaling back</a> its tightening, and <a href="https://www.businessinsider.com/r-assets-worth-1-trillion-to-shift-from-uk-to-eu-due-to-brexit-ey-2019-1">looming Brexit uncertainty</a>. "Strategically, we recommend investors increase portfolio defensiveness," a team of Goldman Sachs strategists led by David Kostin told clients in a note on Monday. "Cash allocations are at or near the bottom of their 30-year historical distribution for many investors."Investors might wonder what defensive means, especially in a challenging market like last year's when few trades worked out. Investors across markets and asset classes <a href="https://www.businessinsider.com/investing-market-strategy-the-argument-for-traders-to-go-into-cash-2019-1">mostly counted 2018 as a loss</a>, and cash became <a href="https://www.businessinsider.com/treasury-yields-versus-dividends-cash-appealing-bad-sign-for-markets-2018-5">more attractive</a> as equities around the world languished.Kostin and his team said investors should consider stocks well-positioned to outperform in an "uncertain economic environment" and came up with a list of 30 names that would still boast an above-average valuation even if earnings were to sharply decline. They included stocks across traditionally defensive sectors like industrials and consumer staples, including the likes of <a href="https://markets.businessinsider.com/stocks/fdx-stock">FedEx</a>, <a href="https://markets.businessinsider.com/stocks/rtn-stock">Raytheon</a>, <a href="https://markets.businessinsider.com/stocks/kr-stock">Kroger</a> and <a href="https://markets.businessinsider.com/stocks/pm-stock">Philip Morris</a>.Read more: <a href="https://www.businessinsider.com/bridgewater-2018-returns-2019-1">Bridgewater, the biggest hedge fund in the world, crushed it in 2018 as most funds struggled</a>Others say even as positive growth is still expected for this year, a more conservative approach is prudent.A team of strategists at AllianceBernstein told clients Monday that while several indicators - including the flattening <a href="https://markets.businessinsider.com/news/stocks/yield-curve-inversion-why-you-shouldnt-w">yield curve</a>, <a href="https://markets.businessinsider.com/news/interestrates/u-s-service-sector-growth-slows-more-than-expected-in-december-1027848367">a downturn in key US service sector data</a> and Economic Surprise Index data - support the view that economic growth is indeed slowing, analysts are expecting positive earnings growth for this year."We face a slowing cycle with growth slowing in most regions, though the timing and pace of the slow-down differs by region," the team led by Inigo Fraser-Jenkins wrote."Monetary policy is also becoming less accommodative in most regions. Against this backdrop we have a somewhat defensive factor allocation, but we retain some cyclical exposure as despite the headwinds we think that growth will still be positive in 2019."Specifically, AllianceBernstein is recommending investors buy companies with qualities like low debt-to-equity ratios, and those with high levels of free cash flow yield. Such a measurement of companies' "quality" tends to be less correlated with political risk, the strategists said.Meanwhile, Bank of America told clients in a note that investors' exposure to "low quality" is a key risk this year."Managers have historically been overweight Low Quality (B or worse S&amp;P quality rank) stocks," strategists led by Savita Subramanian wrote in a report out Monday."Their bias towards lower quality is a key risk in our view, particularly heading into the new year where we expect volatility to remain elevated."Read more: <a href="https://markets.businessinsider.com/news/stocks/stock-picks-bank-of-americas-favorite-picks-2019-2018-12-1027809730">BANK OF AMERICA: Here's a list of our 11 favorite stocks for next year</a>Among traditionally defensive sectors, the bank said active managers last year pared their holdings in consumer staples, a traditionally defensive group, and <a href="https://markets.businessinsider.com/news/stocks/stock-market-news-healthcare-big-chunk-sp-500-good-news-2018-12-1027809670">rotated into healthcare</a>.But that development in and of itself could be reason enough to lighten up on defensive names. Historically, when the healthcare sector reaches 15.6% of the S&amp;P 500, which happened in mid-December, it begins underperforming and the broader market starts bottoming out, according to an analysis from DataTrek Research.Now read:<ul><li><a href="https://www.businessinsider.com/investing-market-strategy-the-argument-for-traders-to-go-into-cash-2019-1">The best-performing investment of 2018 came as a shock to everyone - and the stars are now aligned for its continued dominance</a></li><li><a href="https://www.businessinsider.com/next-financial-crisis-how-corporate-debt-burdens-leveraged-loans-could-hurt-markets-2019-1">Here's how the risky behavior of debt-heavy corporate giants like GE and AT&amp;T could spark the next financial crisis</a></li></ul> <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/disney-world-expensive-middle-class-2018-12">Disney World is getting so expensive that it's pricing out the middle class</a></h3> <div> </div> </div>

WALL STREET WARNS: Get defensive, growth is slowing in nearly every corner of the world

<div class="KonaFilter image-container display-table"><div><div class="image"></div></div></div><ul class="summary-list"><li>You have a great idea for a business - now you just need to launch it.</li><li>Business Insider spoke with four business owners and experts to learn the best steps to take to build your company from the ground up.</li><li>These include figuring out how to structure your business - whether it's a partnership or LLC, for example - as well as registering your business' name and obtaining an employer identification number.</li><li>Next, you should open up a bank account specifically for your business and implement a cloud-based bookkeeping system.</li><li><a href="https://www.businessinsider.com/prime?module=article&amp;area=summary">Click here for more BI Prime stories.</a></li></ul>You've come up with a brilliant idea for a product or service. You've done your research and identified your audience as well as your competition. Perhaps you've created a <a href="https://www.businessinsider.com/10-resources-for-creating-a-killer-business-plan-2014-4">business plan</a>, which is a smart move if you're hoping to secure financial backing. If you're ready to take the leap and launch your business, you may be wondering where to begin. We asked four entrepreneurial experts to share the first five steps necessary to start a business, any business, from freelancing and photography to tax preparation and interior design. Here's their advice.<h1>1. Consult with a professional about how to structure your business </h1>You can choose to operate your business as a: <ul><li>Sole proprietor: The simplest of business structures, this unincorporated entity is owned solely by one individual, who retains the profits but also has unlimited liability for the debts and obligations of the business. It's easy to set up and just as easy to dissolve.</li><li>Partnership: This common form of business is established when partners agree to set up and run a business together. In doing so, partners share in the assets and profits, as well as the financial and legal liabilities of this entity, and are subject to unlimited liability.</li><li>Limited liability company (LLC): As its name implies, this entity limits the personal responsibility of owners. But some states require that the LLC dissolves after a set number of years or if a member dies or quits.</li><li>Corporation: This structure is more complicated and, thus, expensive to establish. Owners are protected from liability but they're often less autonomous because they may report to shareholders.</li></ul>There's no one-size-fits-all answer, and you may even decide to change from one form to another as your business evolves over time. The structure you select, however, will impact your personal liability as well how much you pay in taxes. For these reasons, it's fiscally prudent to get personalized advice from a qualified business attorney or certified public accountant (CPA), who can help you determine which is your best option. According to the online marketplace for legal services <a href="https://www.upcounsel.com/small-business-lawyer-cost">Upcounsel</a>, the cost of hiring a small business lawyer can range from $150 per hour for a junior associate to $1,000 per hour to retain the services of a senior partner at a prestigious firm. Depending on an accountant's level of experience and location, expect to pay <a href="https://smallbusiness.costhelper.com/accountants.html">between $150 and $400 per hour</a>."Believe it or not, not every small business needs to set up a business entity such as an LLC or a corporation, especially when they're just starting out," said Logan Allec, CPA and owner of personal finance site <a href="https://moneydoneright.com/">Money Done Right</a>, which has over 30,000 email subscribers and garners more than 100,000 visitors per month. <div class="KonaFilter image-container display-table float_right"><div><div class="image"></div></div></div>In some cases, he noted, jumping the gun on forming a business entity could eat into your profits."Forming an LLC in California, for example, will cost you a franchise tax payment of $800 per year, whether or not you need or even use the LLC," Allec explained. "That being said, given your industry and personal wealth situation, it may very well be advisable to set up a business entity for your business right from the get-go for asset and legal protection purposes."By forming an LLC, owners limit their personal liability. In the event that a lawsuit is brought against the business, only its assets can be claimed by creditors - the owners' personal assets can't be touched.To find trusted professionals who can offer their insight for the best business structure, Allec suggested visiting local entrepreneur groups and getting word-of-mouth recommendations from those who've had positive experiences. Allec shared that based on his expertise as a CPA, he chose to form an LLC."For me, the choice was between forming an LLC or a corporation," he said. "In my state, the LLC is less expensive to set up and easier to maintain than a corporation, so I opted to form an LLC."<h1>2. Choose a business name and register it</h1>Deciding what to name your business seems like it should be one of the easier and more fun aspects of starting your endeavor. But if you're struggling to come up with a name that either conveys what your business is all about or makes a positive first impression, you may want to consult with a branding expert or visit a site like <a href="https://www.squadhelp.com/Help-Me-Name-My-Business">Squad Help</a>, which harnesses the brainpower of over 100,000 talented professionals to help create your entire brand. If you have your heart set on a name for your business, first you'll need to make sure it isn't already in use or trademarked. You can check this for free at <a href="https://www.legalzoom.com/business/business-formation/entity-name-check-overview.html">LegalZoom.com</a>. If it's available, you'll need to register it, as this makes your business a distinct legal entity. How and where you need to register depends on your business structure and location. Simply by creating an LLC or corporation, you've registered your business name, as filing articles of organization (for an LLC) or articles of incorporation (for a corporation) registers the name with your state.But if you're starting a sole proprietorship or partnership, you'll want to conduct a Doing Business As (DBA) search with your local county clerk's office to make sure the name you want is available, said Kyle Odom, owner of <a href="https://www.barcop.com/">Bar Cop</a>, a software company that helps restaurant and bar owners track inventory and whose customer count has grown approximately 20% year over year since it was founded in 1998, to include roughly 32,000 individual establishments worldwide."You will need a DBA to open a bank account in your business name," he explained. You can <a href="https://www.legalzoom.com/sem/biz/dba.html">file DBA online</a>, and pricing starts at a flat fee of $99, plus state filing fees. The application will ask you what you'd like to call your business, if you're registering it for the first time, and in which state you want to do business.If you're using your own legal name as your business' name, you don't need to register it. Once your business name is good to go, experts recommend registering your domain name (also known as your website URL) so customers can easily find you on the internet - and so that it doesn't get scooped up by the next small business that launches with a similar name. You can do this by visiting a domain name registrar, such as <a href="https://www.godaddy.com/">GoDaddy</a> or <a href="https://www.namecheap.com/">Namecheap</a>. The cost of a domain name varies depending on several factors: <ul><li>the domain extension, for example ".com" vs ".shop";</li><li>the length of time you select to retain the name; and</li><li>where you purchase it. For instance, it's cheaper to purchase a new name through a registrar than through a private seller.</li></ul>Typically, a domain name can cost as little as between $2 and $20 per year. <h1>3. Obtain an employer identification number </h1>Next, you'll want to get an employer identification number (EIN), which is a nine-digit number assigned to your business by the Internal Revenue Service (IRS). You'll use this number when you file your taxes and open a business bank account. Think of it as your business' social security number. "You may need to obtain one if your business meets certain criteria," noted Allec. "For example, if there are multiple owners in your business, you need an EIN. If you set up a corporation for your business or elected to be taxed as one (either an S corporation or a C corporation), you need to get an EIN."The <a href="https://www.irs.gov/businesses/small-businesses-self-employed/do-you-need-an-ein">IRS website</a> outlines which business entities are required to get an EIN. But even if you're not required to get an EIN, it still may be a good idea to do so. "If you will be working with clients who will be issuing you 1099 forms, you will have to provide them with your social security number if you don't have an EIN to give them," said Allec.<div class="KonaFilter image-container display-table float_right"><div><div class="image"></div></div></div>And, added Deborah Sweeney, CEO of <a href="https://www.mycorporation.com/">MyCorporation.com</a>, an online leader in business formations, trademarks and copyrights, and more, "if you plan to hire and pay employees, open a business bank account, or establish a retirement plan, you'll need an EIN."How do you obtain an EIN? "In the old days, obtaining an EIN meant filing a form with the IRS and waiting for them to get back to you," said Allec. "Now, <a href="https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online">you can do it online</a> and have your EIN within 15 minutes." You need to complete the application in one session and have a valid taxpayer identification number. The application is free when you use the IRS website, so beware of other sites that attempt to charge for this service. <h1>4. Open up a business bank account</h1>If you have a business, you need a business bank account. "Keeping your business inflows and outflows separate from your personal accounts will not only make bookkeeping and taxes a lot easier, but it will also get the conversation [started] with business bankers who could potentially help you with funding down the line," said Allec. "Keep in mind that every bank has slightly different rules when it comes to opening a business bank account, so be sure to call ahead so you understand exactly what information and documents the banker will need to open up your account."Allec suggested looking for sign-up bonuses when opening your business bank account, as both national and local banks routinely offer new businesses cash incentives simply for opening a new business bank account. Additionally, you want to make sure the bank is a good fit for your needs. "For example, a business owner whose company routinely invests in equipment purchases and other large capital expenditures will likely want a bank nearby where he or she can communicate their financing needs in person and develop face-to-face rapport with business bankers," said Allec. "My needs, however, as the owner of an online service-based business are far more simple: I just needed an account where cash can come in and out and didn't want any fancy bells and whistles. I also wanted an account where I could easily check my balance on the go. So, the most important things to me were a low fee structure and a top-notch mobile banking app."For Allec, finding the right bank account didn't take much work. "The bank at which my wife and I bank personally sent me a mailer with a sign-up bonus offer for opening a new business bank account," he said. "I researched the fee structure and found that the monthly fee would be waived if I maintained a relatively low balance each month, and I was already familiar with this bank's mobile banking app and was very pleased with it."Ask your banker about services that are not only important to you now but those that may be of value down the line. For example:<ul><li>Are there minimum balance requirements? (No one wants to get hit with unexpected fees if the balance dips below a certain level.)</li><li>Does the bank charge overdraft or electronic transfer fees?</li><li>Will the bank extend a line of credit if needed? If so, what are the interest rates?</li><li>Is mobile check deposit available?</li><li>Will your account earn interest?</li></ul><h1>5. Implement a cloud-based bookkeeping system</h1>While you don't necessarily need to hire a bookkeeper on day one, you should have some kind of automated bookkeeping system in place."Obviously, you need a set of books to do your taxes, but beyond that, knowing exactly how much your business is making every month is essential to making good business decisions," said Allec. "Technology makes bookkeeping so easy these days, so there's really no excuse to not have a system in place."<div class="KonaFilter image-container display-table float_right"><div><div class="image"></div></div></div>Robert Gauvreau, CPA and founder of <a href="https://gauvreaucpa.ca/category/venturenorth/">Venture North</a>, a 38,000-square-foot entrepreneurial incubator business hub and program, recommended purchasing a cloud-based bookkeeping solution."If you implement this system right out of the gates, it is as simple as one or two minutes per day to review transactions, and you will never get behind again," he said. "A few options for a cloud-based bookkeeping solution would be <a href="https://quickbooks.intuit.com/oa/online/">QuickBooks Online</a>, <a href="https://www.sage.com/en-us/cp/sage50cloud-nca-pricematch/">Sage 50</a>, <a href="https://www.xero.com/us/try/online-accounting/">Xero</a>, and <a href="https://www.sendwave.com/">Wave</a>. As a bonus, if you enter your budgeted figures into your cloud-based bookkeeping software, you can continue to monitor your progress and determine if you are on track to realizing your vision and financial results in your business."Which system does the entrepreneur use for his own business? "The cloud-based bookkeeping system we use is QuickBooks Online, which is an incredibly powerful platform," he said. "A few of the reasons it won us over was its ease of use, its ability to customize reporting, and its integration with other third-party solutions that provide for even greater financial analytics."Launching a business is an exciting time. Taking the right steps can help set you on the path for success.

The first 5 steps every entrepreneur needs to take to launch a business, according to people who've done it

<div class="KonaFilter image-container float_right"><div class="image on-image"><a href="http://vimeo.com/45296788">CPSL via Vimeo</a></div></div><keyword id="483795" type="PERSON" weightage="60" keywordseo="Jeremy-Grantham">Jeremy Grantham</keyword>'s <a href="http://www.gmo.com/websitecontent/GMO_QtlyLetter_ALL_3Q2013.pdf">Q3 letter to GMO clients</a> is out.
The legendary investor, has long been cautious on stocks, predicting <a href="http://www.businessinsider.com/future-stock-returns-will-be-terrible-2013-8">low to negative average annual returns over the next seven years</a>.
But with with signals suggesting bubble-like conditions in the market, Grantham speculates we could see stocks explode higher before sinking deep into a bear market.
"My personal guess is that the U.S. market, especially the non-blue chips, will work its way higher, perhaps by 20% to 30% in the next year or, more likely, two years, with the rest of the world including emerging market equities covering even more ground in at least a partial catch-up," writes Grantham.
"And then we will have the third in the series of serious market busts since 1999 and presumably Greenspan, Bernanke, Yellen, et al. will rest happy, for surely they must expect something like this outcome given their experience," he added. "And we the people, of course, will get what we deserve. "
This is not to say he recommends timing the market.
"Be prudent and you'll probably forego gains," he warns. "Be risky and you'll probably make some more money, but you may be bushwhacked and, if you are, your excuses will look thin. Your call. We of course are making our call."
From his letter:
Timing Bear Markets My personal view is that the Greenspan-Bernanke regime of excessive stimulus, now administered by Yellen, will proceed as usual, and that the path of least resistance, for the market will be up. I believe that it would take a severe economic shock to outweigh the effect of the Fed's relentless pushing of the market. Look at the market's continued advance despite almost universal disappointment in economic growth. Exhibit 3 shows the economic forecasts for major economic countries made a year ago by the IMF compared to what actually happened. Only Japan was a modest pleasant surprise at 0.7% ahead of forecast and the U.K. and Switzerland scraped home by the skin of their teeth. Everyone else fell short. There have been few such occasions when such broad disappointment with economic growth still allowed the U.S. and most other major economies to make material upward moves in their stock markets. It is yet another testimonial to the global reach of the Fed's stimulus of equities (as was the very substantial decline in emerging market equities on just talk of tapering!).
In equities there are few signs yet of a traditional bubble. In the U.S. individuals are not yet consistent buyers of mutual funds. Over lunch I am still looking at Patriots' highlights and not the CNBC talking heads recommending Pumatech or whatever they were in 1999. There are no wonderful and influential theories as to why the P/E structure should be much higher today as there were in Japan in 1989 or in the U.S. in 2000, with Greenspan's theory of the internet driving away the dark clouds of ignorance and ushering in an era of permanently higher P/Es. (There is only Jeremy Siegel doing his usual, apparently inexhaustible thing of explaining why the market is actually cheap: in 2000 we tangled over the market's P/E of 30 to 35, which, with arcane and ingenious adjustments, for him did not portend disaster. This time it is unprecedented margins, usually the most dependably mean reverting of all financial series, which are apparently now normal.) By June this year, markets felt relatively quiet and under the surface there was still a considerable undertow of risk aversion in the institutions. The Russell 2000 and the GMO High Quality universe1 were both just level with the S&amp;P, all up 16%. Normally we would have expected the Russell to outperform handsomely. However, since then speculation has perked up so that today, the broad U.S. market is up 20% and the Russell 2000 is a more typical six points ahead while stocks in the GMO High Quality universe are several points behind. We have also had a sharp and unexpected uptick in parts of the IPO market in the U.S., so I would think that we are probably in the slow build-up to something interesting - a badly overpriced market and bubble conditions. My personal guess is that the U.S. market, especially the non-blue chips, will work its way higher, perhaps by 20% to 30% in the next year or, more likely, two years, with the rest of the world including emerging market equities covering even more ground in at least a partial catch-up. And then we will have the third in the series of serious market busts since 1999 and presumably Greenspan, Bernanke, Yellen, et al. will rest happy, for surely they must expect something like this outcome given their experience. And we the people, of course, will get what we deserve. We acclaimed the original perpetrator of this ill-fated plan - Greenspan - to be the great Maestro, in a general orgy of boot licking. His faithful acolyte, Bernanke, was reappointed by a democratic president and generally lauded for doing (I admit) a perfectly serviceable job of rallying the troops in a crash that absolutely would not have occurred without the dangerous experiments in deregulation and no regulation (of the subprime instruments, for example) of his and his predecessor's policy. At this rate, one day we will praise Yellen (or a similar successor) for helping out adequately in the wreckage of the next utterly unnecessary financial and asset class failure. Deregulation was eventually a disappointment even to Greenspan, shocked at the bad behavior of financial leaders who, incomprehensibly to him, were not even attempting to maximize long-term risk-adjusted profits. Indeed, instead of the "price discovery" so central to modern economic theory we had "greed discovery."
(Memo: "price discovery" is the process that happens in an open and competitive and unregulated market, where the interplay of supply, demand, and cost structures determines the efficient price. "Greed discovery" is the process by which a vastly and unnecessarily complicated financial system is exploited by expert insiders. These insiders have far more knowledge than the lambs - formerly known as clients - and without adequate regulations the lambs are defleeced in a surge of "rent seeking.")
In the meantime investors should be aware that the U.S. market is already badly overpriced - indeed, we believe it is priced to deliver negative real returns over seven years - and that most foreign markets having moved up rapidly this summer are also overpriced but less so. In our view, prudent investors should already be reducing their equity bets and their risk level in general. One of the more painful lessons in investing is that the prudent investor (or "value investor" if you prefer) almost invariably must forego plenty of fun at the top end of markets. This market is already no exception, but speculation can hurt prudence much more and probably will. Ah, that's life. And with a Fed like ours it's probably what we deserve.
Inconvenient Conclusion Be prudent and you'll probably forego gains. Be risky and you'll probably make some more money, but you may be bushwhacked and, if you are, your excuses will look thin. Your call. We of course are making our call.
Postscript 1 What can go wrong for the market? There is a slow and for me rather sinister slowing down of economic growth, most obviously in Europe but also globally, that could at worst overwhelm even the Fed. The general lack of fiscal stimulus globally and the almost precipitous decline in the U.S. Federal deficit in particular do not help. What are the odds in the next two years? Perhaps one in four.
Postscript 2 Hot off the press, for a less serious moment at our client conference comes the latest update (or data mining, if you prefer) of the... ta da...Presidential Cycle. Since October 1977 when GMO started, 36 years have passed. In that time - when logic and experience say you stimulate to help the next election - the third year has been over 11/2 times the other three added together and years one and two, when you should be tightening, have been commensurately weak. For the weakest five cycles, the average of years one and two was negative but for three cycles it was strong, even very strong. These three cannot be blamed totally on the Greenspan-Bernanke regime's tendency to overstimulate,
Read the whole letter at <a href="http://www.gmo.com/websitecontent/GMO_QtlyLetter_ALL_3Q2013.pdf">GMO.com</a>.

GRANTHAM: I Personally Think Stocks Will Head 20-30% Higher In The Next Year Or Two

The White House is said to be vetting Judy Shelton for a seat on the Fed. She told us what she would bring to a central bank whose policies she has long criticized.

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Thomson ReutersMichael Pearson, chairman of the board and chief executive officer of Valeant Pharmaceuticals International Inc, speaks during their AGM in Laval Quebec</div></div></div>Embattled Canadian drug company Valeant Pharmaceuticals said Michael Pearson will remain CEO until a successor is named.Activist investor Bill Ackman is joining the board. "I am looking forward to working with the board to identify new leadership for Valeant," Ackman said in a statement.Ackman, the founder of the $12 billion Pershing Square Capital, is the largest hedge fund shareholder of Valeant with a 9% stake.Ackman lost, at least on paper, <a href="http://www.businessinsider.com/pershing-square-holdings-halted-2016-3">more than $1 billion</a> on his position last week as the stock dropped more than 61%.In an email to investors last week, Ackman pledged to take a "more proactive role at the company to protect and maximize the value of our investment." Here's the full release: March 21, 2016<div class="pr-body"><div class="xn-content">Initiates Search for New CEO; J. Michael Pearson to Remain as CEO Until Successor is NamedWilliam A. Ackman Joins Board of Directors; Katharine B. Stevenson Steps Down from BoardAd Hoc Committee Review of Accounting and Financial Reporting Matters Nearing CompletionValeant Plans Restatement Based on Previously Announced MisstatementsValeant Explains Circumstances that Resulted in Delay in the Filing of 10-KValeant Pharmaceuticals International, Inc. today announced that it has initiated a search for a new chief executive officer, appointed William A. Ackman to its board of directors, and provided an update on certain accounting and financial reporting matters.CEO SearchValeant today announced that the board has initiated a search to identify a candidate to succeed J. Michael Pearson as chief executive officer. Mr. Pearson will continue to serve as CEO and a director until his replacement is appointed.Robert Ingram, chairman of the board, stated, "While the past few months have been difficult, Valeant has a collection of leading brands, valuable franchises and great people, and I am confident that the company will be able to rebuild its reputation and thrive under new leadership. We thank Mike for his dedicated service to Valeant and for agreeing to stay on until we conclude our search. As a colleague and a friend he will be missed, and we wish him the best for the future." "It's been a privilege to lead Valeant for the past eight years," said J. Michael Pearson, chief executive officer. "While I regret the controversies that have adversely impacted our business over the past several months, I know that Valeant is a strong and resilient company, and I am committed to doing everything I can to ensure a smooth transition to new leadership."Changes to Board of DirectorsValeant today announced that William A. Ackman, CEO of Pershing Square Capital Management, L.P., will join its board of directors, effective immediately. Mr. Ackman, whose firm has a 9.0% stake in Valeant, will join Pershing Square's Vice Chairman, Stephen Fraidin, on the board. As the maximum size of Valeant's board currently is fixed at 14 directors, Katharine B. Stevenson voluntarily resigned from the Board to create a vacancy to permit Mr. Ackman's appointment. The Board requested that former chief financial officer Howard Schiller tender his resignation as a director, but Mr. Schiller has not done so. Robert Ingram, chairman of the board said, "We look forward to Bill Ackman's perspective and contributions as a new member of our board and one of Valeant's largest shareholders. The Board thanks our valued colleague, Kate, for her service on our Board and for voluntarily offering to step down in order to allow Bill Ackman to join the Board."William A. Ackman, CEO of Pershing Square, said, "I am looking forward to working with the board to identify new leadership for Valeant. The company's large scale and dominant franchises in eye care, dermatology, GI, and other therapeutic areas coupled with its extraordinarily low valuation present a spectacular opportunity for a world-class health care executive. On behalf of all shareholders, we are extremely appreciative of Valeant employees' hard work and commitment during this challenging time for the company."Accounting and Financial Reporting UpdateAs previously disclosed, on February 22, 2016, based on the work of an ad hoc committee of the Board (the "Ad Hoc Committee") established to review allegations regarding the company's relationship with Philidor and related matters, as well as additional work and analysis by the company, the company preliminarily determined that approximately $58 million in net revenue relating to sales to Philidor in the second half of 2014 should not have been recognized upon delivery of product to Philidor. Management of the company, the Audit and Risk Committee (the "Committee") and the Board have concluded that the company's audited financial statements for the year ended, and unaudited financial statements for the quarter ended, December 31, 2014 included in the company's Annual Report on Form 10-K and the unaudited financial statements included in the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 should no longer be relied upon due to the misstatements described in the company's Form 8-K filed today. In addition, due to the fact that the first quarter 2015 results are included within the financial results for the six-month period included in the Quarterly Report on Form 10-Q for the period ended June 30, 2015 and the financial results for the nine-month period included in the Quarterly Report on Form 10-Q for the period ended September 30, 2015, management, the Committee and the Board have concluded that the financial statements for such six-month and nine-month periods reflected in those Quarterly Reports should no longer be relied upon. The company is in the process of restating the affected financial statements and the restated financial statements will be included in the company's Annual Report on Form 10-K for the year ended December 31, 2015, which the company intends to file with the Securities and Exchange Commission and the Canadian Securities Regulators on or before April 29, 2016. The company believes that after giving effect to the restatement, it will have remained in compliance with all of the financial maintenance covenants in its credit facility at the end of each affected quarterly period.Robert Ingram, chairman of the board and chair of the Ad Hoc Committee stated, "Over the past five months, the Ad Hoc Committee has worked closely with our independent advisors to conduct a comprehensive review of Philidor and related matters. While the Ad Hoc Committee is still reviewing certain accounting related items, and has identified certain concerns related to those items with respect to the tone of the organization, it has not identified any additional items affecting the financial statements to date."Impact of MisstatementsAs described in the company's Form 8-K filed today, the company has identified misstatements to date that would reduce previously reported fiscal year 2014 revenue by approximately $58 million, net income attributable to Valeant by approximately $33 million, and basic and diluted earnings per share by $.09. A substantial part of the earnings impact of these misstatements will reverse in the first quarter of 2015. The company has identified misstatements in the first quarter of 2015, consisting primarily of the reversing effect on earnings of the 2014 misstatements, which would reduce revenue by approximately $21 million (timing of recognition of managed care rebates), increase net income attributable to Valeant by approximately $24 million and increase basic and diluted earnings per share by $.07. These adjustments are preliminary, unaudited and subject to change. We refer you to the company's Form 8-K filed today for a more detailed description of the restatement.Assessment of Disclosure Controls and Procedures and Internal Controls Over Financial ReportingAs a result of the restatement, management is continuing to assess the company's disclosure controls and procedures and internal control over financial reporting. Management, in consultation with the committee, has concluded that one or more material weaknesses exist in the company's internal control over financial reporting and that, as a result, internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2014 and disclosure controls and procedures were not effective as of March 31, 2015 and the subsequent interim periods in 2015 and that internal control over financial reporting and disclosure controls and procedures will not be effective at December 31, 2015. The improper conduct of the company's former Chief Financial Officer and former Corporate Controller, which resulted in the provision of incorrect information to the Committee and the company's auditors, contributed to the misstatement of results. In addition, as part of this assessment of internal control over financial reporting, the company has determined that the tone at the top of the organization and the performance-based environment at the company, where challenging targets were set and achieving those targets was a key performance expectation, may have been contributing factors resulting in the company's improper revenue recognition. In connection with the Ad Hoc Committee's work to date, certain remediation actions have been recommended and are being implemented by the company, including placing the company's former Corporate Controller on administrative leave. The board and the talent and compensation committee, based on recommendations of the Ad Hoc Committee, have determined that the deficient control environment, among other things, would impact executive compensation decisions with respect to 2015 compensation for certain members of senior management. The company is in the process of implementing additional remedial measures. Circumstances that Resulted in Delay in the Filing of 10-KValeant announced on October 30, 2015 that the Ad Hoc Committee appointed former Deputy Attorney General of the United States, Mark Filip of Kirkland &amp; Ellis LLP, to advise the committee in its review. Over the past five months, Mr. Filip and his colleagues at Kirkland &amp; Ellis have conducted more than 70 interviews and reviewed over one million documents as part of their comprehensive review to assist the Ad Hoc Committee. In addition to certain Philidor-related accounting matters, the Ad Hoc Committee determined that certain other accounting issues required review. That additional work, along with the administrative leave of our former Corporate Controller, has led to the delayed filing of Valeant's 10-K.J. Michael Pearson, CEO of Valeant, said, "While we regret the circumstances that have resulted in the delay of our 10-K filing, we are committed to filing the 10-K on or before April 29, 2016."Covenant HighlightsBond indentures:As discussed on its March 15, 2016 preliminary earnings call, Valeant could receive a notice of default under its bond indentures as a result of the delay in filing its Form 10-K for the year ended December 31, 2015.If such notice is received, Valeant has 60 days from the receipt of the notice to file its 10-K, which will cure the default in all respects. The notice does not result in the acceleration of any of Valeant's indebtedness. Credit agreement:If Valeant does not file its Form 10-K by March 30, 2016, there will be a default under the credit facility. The company will have 30 days, or until April 29, to cure this default by filing its Form 10-K. Valeant expects to file its Form 10-K and become current on its financial filings by April 29, 2016 (within the curing period) but to be prudent, the company also announced that it intends to seek a waiver from the lenders under its credit facility. The waiver that the company is seeking will include a request to extend the deadline to file its Form 10-K for December 31, 2015 and the deadline to file its Form 10-Q for the quarter ended March 31, 2016. Robert L. Rosiello, Valeant's Chief Financial Officer, said, "I appreciate the dedication and effort of our finance staff, who are working diligently to complete and file our 10-K."Delay in Canadian Annual FilingsValeant announced today that it anticipates a delay in filing its audited annual financial statements for the year ended December 31, 2015, the related management's discussion and analysis, certificates of its CEO and CFO and its 2015 Form 10-K (collectively, the "Canadian Required Filings") with Canadian securities regulators until after the March 30, 2016 filing deadline. The company is working diligently and intends to make the Canadian Required Filings on or before April 29, 2016.In connection with this anticipated delay, the company will apply for a customary management cease trade order (the "MCTO") relating to the trading in securities of the company by the company's CEO and CFO and each other member of the company's board of directors from the Autorité des marchés financiers, the company's principal regulator in Canada. If granted, the MCTO should not affect the ability of other shareholders to trade in the securities of the company. If the MCTO is granted, the company intends to comply with the provisions of the alternative information guidelines set out in Canadian National Policy 12-203 Cease Trade Orders for Continuous Disclosure Defaults ("NP 12-203") by providing bi-weekly updates by way of news release until the Canadian Required Filings have been made. </div></div>Valeant's was last trading down around 4.48% in the pre market at around $25.77 per share before being halted for the news.The company reported <a href="http://www.businessinsider.com/r-valeant-cuts-2016-revenue-forecast-2016-3">fourth-quarter earnings results last week that fell below analysts expectations</a>, and it cut its revenue forecast for the year by about $1.5 billion, or 12%. The company has also delayed filing its 10-K.It's been a tough run for Valeant, which has been sliding since late 2015 because of <a href="http://www.businessinsider.com/andrew-left-citron-research-2015-11">accusations of accounting irregularities from a short seller</a> and scrutiny in Washington, D.C., over drug-price increases. Just last month, the company confirmed that <a href="http://www.businessinsider.com/the-sec-is-investigating-valeant-2016-2">it was part of several ongoing investigations</a>.Numerous hedge funds are large shareholders of the stock. They have suffered <a href="http://www.businessinsider.com/hedge-funds-valeant-2016-3">massive losses, at least on paper, on their positions</a>.Ackman, the founder of the $12 billion Pershing Square Capital, is the largest hedge fund shareholder of Valeant. He lost, at least on paper, <a href="http://www.businessinsider.com/pershing-square-holdings-halted-2016-3">more than $1 billion</a> on his position last week. He's lost an estimated more than $2.5 billion (again, on paper) since buying the stock in the first quarter of 2015. He is also having <a href="http://www.businessinsider.com/pershing-square-update-2016-3">the worst year</a> in his fund's history.In an email to investors, Ackman pledged to take a "more proactive role at the company to protect and maximize the value of our investment."Earlier this month, Pershing Square added its vice chairman, former mergers and acquisitions attorney Steve Fraidin, to Valeant's board. <div class="KonaFilter image-container display-table"><div><div class="image on-image"><a href="https://www.nyse.com/quote/XNYS:VRX">NYSE</a></div></div></div><div class="KonaFilter image-container display-table"><div><div class="image on-image"><a href="https://www.nyse.com/quote/XNYS:VRX">NYSE</a></div></div></div> <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/2-in-1-shampoo-conditioner-combination-science-2016-3">Why 2-in-1 shampoo and conditioner products don't work </a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="91YjV0MTE6Q-UUNd4hePsmmU5pUlzcwC" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

Bill Ackman joins Valeant's board, Pearson on the way out

Carl Icahn continued his assault on Apple today.
He announced on Twitter that he bought another $500 million worth of Apple stock, bringing his total to $3.6 billion.
He also wrote an open letter to Apple shareholders explaining why he thinks Apple needs to ramp up its share buybacks. He believes a share buyback would easily goose the company's share price. 
Here's the tweet:
<blockquote class="twitter-tweet" lang="en">
Bought another $500mil of <a href="https://twitter.com/search?q=%24AAPL&amp;src=ctag">$AAPL</a> tday, bringing our total to $3.6 billion. If board doesn't see AAPL's 'no brainer' value we sure do.
- Carl Icahn (@Carl_C_Icahn) <a href="https://twitter.com/Carl_C_Icahn/statuses/426446334422298624">January 23, 2014</a></blockquote>

And <a href="http://www.sec.gov/Archives/edgar/data/320193/000092846414000003/aaplpx14a6g012314.htm">here's the letter</a>:
Dear Fellow Apple Shareholders,
Over the course of my long career as an investor and as Chairman of Icahn Enterprises, our best performing investments result from opportunities that we like to call "no brainers." Recent examples of such "no brainers" have been our investments in Netflix, Hain Celestial, Chesapeake, Forest Labs and Herbalife, just to name a few. In our opinion, a great example of a "no brainer" in today's market is Apple. The S&amp;P 500's price to earnings multiple is 71% higher than Apple's, and if Apple were simply valued at the same multiple, its share price would be $840, which is 52% higher than its current price.1 This is a dramatic valuation disconnect that simply makes no sense to us, and it seems that the company agrees with us on this point. Tim Cook himself has expressed on more than one occasion that Apple is undervalued, and as the company states, it already has in place "the largest share repurchase authorization in history." We believe, however, that this share repurchase authorization can and should be even larger, and effectuating that for the benefit of all of the company's shareholders is the sole intention of our proposal. The company has recommended voting against our proposal for various reasons. It seems to us that the basis of its argument against our proposal is that the company believes, because of the "dynamic competitive landscape" and because its "rapid pace of innovation require[s] unprecedented investment, flexibility and access to resources", it does not currently have enough excess liquidity to increase the size of its repurchase program. Assuming this indeed is the basis for the company's argument, we find its position overly conservative (almost to the point of being irrational), when we consider that the company had $130 billion of net cash as of September 28, 2013 and that consensus earnings are expected to be almost $40 billion next year. Given this massive net cash position and robust earnings generation, Apple is perhaps the most overcapitalized company in corporate history, from our perspective. Regardless of what liquidity it may require with respect to "unprecedented investment, flexibility and access to resources" for innovation moving forward, we believe the unprecedented degree to which the company is currently overcapitalized would overcompensate for any such investments (including possible investments in strategic M&amp;A, to which the company does not refer). Said another way, we believe that the combination of the company's unprecedentedly enormous net cash balance, robust annual earnings, and tremendous borrowing capacity provide more than enough excess liquidity to afford both the use of cash for any necessary ongoing business-related investments in addition to the cash used for the increased share repurchases proposed.
It is our belief that it is the responsibility of the Board, on behalf of the company's shareholders, to take advantage of such a large and unmistakable opportunity. Indeed, we believe that by choosing not to increase the size of the repurchase program, the directors are actually performing a great disservice to the owners, especially smaller shareholders who may not be in a position to buy more stock themselves. Meanwhile, we are in a position to continue buying shares in the market at today's price, so perhaps we should thank the Board for not being more aggressive, and thus allowing us to accumulate an even larger investment position at a price that reflects the aforementioned valuation disconnect. In fact, over the past two weeks we purchased $1 billion more in Apple shares, $500 million of which we purchased today, bringing our total ownership position in Apple to a current value of approximately $3.6 billion.
Given the degree to which Apple appears undervalued to us, we almost feel that it's a waste of time to debate the point. As we believe it to be the preeminent and most innovative consumer products company in the world, with the greatest brand, hardware, software, and services in the world, Apple has had tremendous growth to date, and we fail to see why this growth would not continue moving forward. The industry (smartphones and tablets) is expected to grow volume at a 15% compounded annual growth rate from 2013 through 2017 according to IDC. We believe Apple should continue to benefit from this secular growth, as last year, 85% of Apple's revenues came from smartphones, tablets, and related software, services, and accessories. The naysayers question whether Apple will be able to participate in this growth without sacrificing pricing and gross margins, especially with competition from Google, Samsung, Microsoft, Amazon and Chinese manufacturers. Our response to them is that the answer is already evident to us from the continuing loyalty of Apple's growing customer base. The highly successful evolutionary (not revolutionary) introductions of the iPhone 5s and 5c and Ipad Air and Mini, prove to us that Apple could, for the most part, maintain pricing and gross margin as we believe consumers are willing to pay a reasonable premium for the world's best smartphones and tablets. The rumored future introduction of product line extensions with larger screens for both the iPhone and iPad would further support this view.2 In fact, a recent study from NDC shows that the iPhone accounted for 42% of smartphone users in the United States at the end of 2013, up a staggering 20% from the prior year. Despite its great scale and narrow focus, Apple has an operating margin of just 28.5%. We believe its customers' willingness to pay a premium price for the world's greatest products should enable Apple to participate in the expected volume growth of these categories while at the same time largely maintaining its average selling prices and gross margins. And, as software and services improve and become even more important to consumers in the future, we expect customer loyalty to strengthen further.
Even if the story ended with Apple's existing product and software lines, we would still choose to make Apple our largest investment. But there is more to the story! Tim Cook keeps saying that he expects to introduce "new products in new categories" and yet very few people seem to be listening. We're not aware of a single Wall Street analyst who includes "new products in new categories" or new services in any of their financial projections, even though Apple clearly has an impressive track record of such new category product introductions, even if it does so rarely. Apple released the iPhone in 2007 and the iPad five years later in 2012, both so extraordinarily successful that today they represent the majority of the company's revenue. Tim Cook's comments, along with advancements in enabling technologies, lead us to believe that we may see in the not too distant future what new groundbreaking products they've been working on developing in Cupertino these last several years.3
To get a sense of the scale of the opportunity that stems from new products in new categories, let's take a moment to consider the possibility of an Apple television. The major electronics companies are now focused on ultra high definition TVs as their next big opportunity. Ultra high definition is expected to offer a level of image clarity that is superior to today's high definition televisions for screen sizes 55 inches and above. To date, the barrier to mass market adoption of ultra high definition has been the price gap between it and regular high definition, but that price gap is closing and will soon be de minimis. The closing of this price gap is supported by statements made by the Co-CEO of Samsung Electronics, who expects the price gap to fall to 10% by the end of this year. While cable companies will likely be slow to upgrade their linear TV infrastructure due to cost, video content is expected to be accessible through the internet via services like Netflix and others. We believe ultra high definition represents a major catalyst for the next TV replacement cycle and a promising moment for Apple to introduce its first new product in this category. Reed Hastings, CEO of Netflix, has referenced ultra high definition as a major catalyst for Netflix going forward. While this is true for Netflix, we believe it is also true for Apple, not just for its hardware but also for selling ultra high definition movies and shows on iTunes through the internet. With 238 million TVs sold globally in 2012, it would not surprise us if Apple could sell 25 million new Apple ultra high definition televisions at $1,600 per unit, especially when considering both its track record of introducing best in class products and its market share in smartphones and tablets.4 At a gross margin of 37.7%, which would be consistent with that of the overall company, such a debut would add $40 billion of revenues and $15 billion to operating income annually.5
The possibility of a television represents only one opportunity for the company that stems from new products in new categories. While we won't go through all of them here, we see several major opportunities in hardware alone. With advancements in miniaturization and continued improvements in Siri, it seems obvious to us that Apple has a compelling opportunity in the exciting area of wearable devices, supported by rumors that Apple is developing a smartwatch (as Tim Cook himself said the wrist is "an area of great interest for Apple"). While many consider Apple a hardware company, to pigeonhole it as such is no longer appropriate in our opinion. Apple has built an ecosystem of hardware, software, and services that we believe collectively represents the most successful consumer product platform in the entire history of consumer-facing technologies. And as Apple's customer base continues to enjoy the use of this ecosystem, storing media in the cloud and moving it from one Apple device to another as doing so becomes increasingly convenient with innovations such as Airplay (as just one simple example of this ecosystem's current functionality), we believe that customer base grows increasingly loyal and excited for the next Apple product release, making it an asset in and of itself that grows and becomes increasingly valuable. Indeed, we believe any new software service that offers new functionality to this customer base becomes a large opportunity for Apple to introduce as a revolutionary and disruptive bolt-on to the ecosystem. As just one of many possible examples of this phenomenon, Apple could introduce a next generation payments solution. In terms of whether the marketplace is well addressed by mobile payments solutions, Tim Cook has said "I think it is in its infancy… I think it is just getting started and just of out of the starting block." With the fingerprint sensor, iBeacon, 575+ million credit card numbers stored in iTunes, and Apple's homogeneous iOS installed base with 79% of devices using iOS 7, we believe a revolutionary payments solution is now a very real opportunity that the company could choose to pursue. With respect to all of Apple's new and existing opportunities for growth, they will only prove to be successful with strong execution from the company's management, in whom we hold great confidence. Naysayers say Tim Cook is not Steve Jobs, and they're absolutely right. He is Tim Cook and we believe he is doing an excellent job, and Jonathan Ive, Senior VP of Design, is Jonathan Ive and we believe he's doing an excellent job, etcetera.
In this letter, we have above summarized why we believe Apple is undervalued in order to express how ridiculous it seems to us for Apple to horde so much cash rather than repurchase stock (and thereby use that cash to make a larger investment in itself for the benefit of all of the company's shareholders). In its statement in opposition to our proposal, the company claims that "the Board and management team have demonstrated a strong commitment to returning capital to shareholders" and we believe that is true, but we also believe that commitment is not strong enough given the unique degree to which the company is both undervalued and overcapitalized. Furthermore, it is important to note that a share repurchase is not simply an act of "returning capital to shareholders" since it is also the company effectively making an investment in itself. To us, as long term investors, this is an important difference: a dividend is a pure return of capital while a share repurchase is the company making an investment in itself by buying shares in the market at the current price, which we believe to be undervalued, from shareholders willing to sell at that price for the benefit of shareholders who choose to remain investors for the longer term. And we are long term investors. It should be noted that no one on the Board seems to be an expert in the world of investment management. However, based on our record, we believe few will argue that we are experts in this area, and we have no doubts that the Board is doing a great disservice to its shareholders by not immediately increasing the size of the share repurchase program in order to more effectively take advantage of what we believe to be the company's low market valuation.
We have expressed above what we believe to be the company's primary reason for not supporting our proposal. Conversely, it is our belief that Apple's current excess liquidity is without historical precedent and beyond reasonable comparison to its peers or otherwise, and such dramatic overcapitalization affords the company enough excess liquidity to repurchase the amount of shares we proposed. Apple's existing capital return program has just $37 billion remaining, and the company has until the end of 2015 to complete it. Without any changes to the program, the largest pile of corporate cash in the world is likely to grow even larger, and if the share price rises, this Board will have missed a great opportunity to use more of that hoarded cash to repurchase shares at an attractive value. While it is important for the Board to focus on the return of capital on a sustained basis, it is also important for the Board to evaluate whether or not its share price is undervalued and to take advantage of it with share repurchases, especially when the balance sheet exhibits dramatic excess liquidity, as we believe Apple's does today.
The Board may argue that with so much opportunity, it would be prudent to maintain its excess liquidity to increase R&amp;D or make acquisitions, especially when considering the financial strength of its competitors. We completely agree that the company must innovate and should be flexible to make prudent strategic acquisitions, yet even after taking such factors into account, we believe that tremendous excess liquidity remains. With respect to possible M&amp;A (to which the company does not refer in its statement), for the opportunities highlighted above (a TV, a watch, a payment service), we find it extremely difficult to identify any possible strategic acquisitions of scale that make sense. Furthermore, such action would seem to conflict with Apple's culture historically. A remarkable fact is that since the Board reacquired Steve Jobs through the NeXT acquisition for $427 million in 1997, the next largest acquisition Apple made was $2.6 billion for Nortel's patent portfolio. Amazingly, over these 17 years, Apple made just $7.8 billion worth of acquisitions in total during this timeframe. Apple clearly has a long history and culture of developing its innovation internally, which leads us to believe that the company will not seek out large acquisitions to pursue any of the opportunities about which we have speculated. In terms of paying for the necessary innovation internally, Apple is expected to generate $40 billion of earnings next year, which already takes into account an increasing R&amp;D expense. In order to address the argument that Apple should reserve excess liquidity to more effectively compete with some of its deep-pocketed competitors, there is no doubt that some of them also have significant earnings and net cash on their balance sheets (whether or not that is appropriate). But Apple has much more. When compared to its next largest competitor, Microsoft, for example, Apple has $68 billion more net cash and is expected to generate $18 billion more in earnings during 2014.
The Board may argue that much of its cash and earnings are international and therefore subject to a repatriation tax if returned to the United States to repurchase shares. While this is true, we question why the company would not simply borrow the money in the Unites States to the extent it deems its domestic cash of $36 billion and domestic earnings are insufficient. Given that the company has $130 billion of net cash and $40 billion of expected annual earnings, and the fact that it is hard to find a better time in history to borrow money, a $50 billion share repurchase over the course of fiscal year 2014 seems more than reasonable to us. Today, Apple's outstanding ten year bonds yield 3.63%, and its five year bonds yield 2%. Apple could either continue to carry this debt, repay it from its domestic earnings over time, or repatriate cash from abroad upon the passage of corporate tax reform.
The company has stated that it is "updating perspectives on its capital return program for 2014 and beyond" and "collecting input from a very broad base of shareholders." We believe, if our proposal receives majority shareholder support, that the Board should respect it and increase the repurchase program as requested. We believe this action will greatly enhance value for all long term shareholders who believe, as we do, in the great potential of this company. If the Board takes this action, we will applaud them for taking advantage of one of the greatest examples of a "no brainer" we have seen in five decades of successful investing.
Sincerely yours,
Carl C. Icahn

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