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Tech History Broken As Yahoo Sells To Verizon For $5 Billion

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Tech History Broken As Yahoo Sells To Verizon For $5 Billion

Yahoo was once considered to be a king of sorts when it came to the internet.

It was seen as a behemoth worth $125 billion and comparable to the greatness that Google and Facebook are engaging in today.

However, it is now being sold to Verizon for mere change.

As shown below, the speculation that preceding the deal led to an increase in value for the shares around Yahoo:

Yahoo! Shares | Tech History Broken As Yahoo Sells To Verizon For $5 Billion

Yahoo made an announcement on Monday Morning regarding their future.

There had been a long and tedious process, but it had finally concluded with the decision to sell Yahoo’s core operating business to Verizon for just under $5 billion in cash.

Though it came after Yahoo had created a mess of their doing and were attempting to extricate from it, this transaction, unfortunately, marks the end of the independence of one of the most iconic pioneering companies in Silicon Valley.

Marissa Mayer, the seventh, as well as final, CEO of Yahoo, is reported to depart following the conclusion of the deal.

She will receive a severance pay worth upwards of $50 million.

The sale with Verizon will cause Yahoo to unite with another fallen internet king.

Last year, Verizon bought AOL for $4.4 billion, making it their first web portal purchase.

The largest wireless provider in the United States is betting almost $10 billion that the combination of these two formerly dominating websites will raise it above expectations in both mobile content and advertising technology that can be used to gain leverage with over 140 million subscribers.

Marissa Mayer  announced the news through an email and said that the deal would not only lead to a significant step towards creating a separation between the operating business of Yahoo and Asian asset equity stakes, but it would also create exciting and new opportunities that would speed up Yahoo’s transformation.

She also mentioned that though many separate entities expressed an interest in Yahoo, Verizon was the company to show the most belief in the value that everyone at Yahoo created.

Verizon also revealed that they believed in the power a combination could offer their advertisers, partners, and users.

To focus on Yahoo offers the bigger story today when you think about how it completely squandered its enormous head start by allowing every new wave of technology sweep past it, whether it be in search, mobile, or social.

Compared to what it was ten years ago, Yahoo seems to have remained the same company for the most part as a portal used by hundreds of millions of people all around the world.

Their users rely on Yahoo for a majority of tasks, including basics like news and weather, as well as critical functions that include email or searching.

When the word became indulged in the universe of smartphones and mobile apps, the advantage that Yahoo had held over the desktop battleground started to fade away.

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To give a history, Yahoo commenced in 1994 under the name Jerry’s Guide to the World Wide Web, which was essentially a compilation of websites curated by two students of Stanford University, Jerry Yang and David Filo.

This list grew at a fast pace due to the millions of Americans that began to turn on dial-up Internet connections.

When people set up these internet connections, they desired a homepage that could direct them to all of the destinations that they deemed essential and visited frequently.

The website went public in 1996 and gained popularity until it rose to astounding heights, eventually reaching their peak of $500 per share in January of 2000.

A share during today’s post-split calculations would equal around $125.

This is major because internet usage shot up during the following years, as shown in the graph below.

Internet users in the world | Tech History Broken As Yahoo Sells To Verizon For $5 Billion

However, Yahoo missed a crucial opportunity by not choosing to convert the website into something greater than just a portal.

With their early lead and millions of users, it could have been something huge.

At the peak of the bubble, Yahoo spent $5.7 billion on buying Broadcast.com, as well as $4.5 billion to buy Geocities.

It was reported that they later destroyed their chance to buy early versions of Facebook and Google, websites that are now thriving in the technological world.

Yahoo’s particular search offering holds a mere fraction of the market currently, though they tried to make up for missing out on buying Facebook by purchasing another social network, Tumblr.

This eventual purchase did not help them.

You can see Tumblr valued by Yahoo here.

During the last four years, Mayer, who is a former executive for Google, attempted to take control of Yahoo and put them back on the playing field.

Sadly, her tenure was unsuccessful due to confused strategy and unfortunate mismanagement.

When the iPhone came out, revenue peaked the year after in 2008, but traffic has maintained a steady decline as users continually find that their attention is drawn to newer and more relevant apps and websites.

When Jerry Yang made the risk of betting $1 billion on Alibaba in 2005, it managed to keep Yahoo afloat and successful enough to stay alive.

That move bought 40% in what would eventually turn into China’s e-commerce leader.

Over time, Yahoo made the decision to sell parts of the holding, but its current stakes remains at a worth of over $30 billion at prices today.

This investment ended up being so abundantly successful that it became worth much more than the flagging core business of Yahoo.

In 2015, management at Yahoo mapped out a tax-free spin-off for its stake in Alibaba, a plan that would unlock shareholder value.

However, they canceled the move at the last minute due to the IRS refusing to offer its blessing for the action.

Yahoo has since been evaluating other strategic means and alternatives with a long auction process lasting months that would benefit its core business.

This process has earned headlines, as well as constant speculation and questions.

The sale will not contain Yahoo Japan or the company’s stakes and holdings in Alibaba.

While many experts have been certain for a long time that Verizon in the frontrunner, others put in bids.

Dan Gilbert and Warren Buffett, both billionaires, pledged their support to one offer while the parent company of Yellow Pages, as well as a private equity firm called TPG followed suit.

In the final accounting, however, Verizon reigned victorious in snagging Yahoo’s technology and web properties for a relatively low price, 22 years following inception.

Some say that the end of Yahoo is an ironic one.

While the consumer web opened and allowed the portal to be a sort of online superpower, Yahoo is now destined to be consumed by a company that allows a higher number of users to access the Internet daily from anywhere in the world.

These figures are greater than the founders of Yahoo could have ever anticipated or dreamed about when the website first launched.

Conclusion

Yahoo started out as a simple web portal.

It has since become a great internet powerhouse used for searching, gaming, and weather and news updates.

Some say the fall of Yahoo is due to poor buying choices by the company, including passing up young versions of Facebook and Google.

Yahoo’s shares were plummeting since the beginning of 2015, as the graph below indicated.

However, these numbers were growing after there was speculation that Verizon would purchase Yahoo to combine with AOL, a fact that was announced in the last week.

Yahoo! NASDAQ | Tech History Broken As Yahoo Sells To Verizon For $5 Billion

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US Housing Sales Boom Will Last Until 2021

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top view of houses at daytime photo-US Housing Sales Boom-us-featured

Redfin CEO Glenn Kelman told CNBC on Thursday that he sees the US housing sales boom will last until 2021. Total US Home sales increased 9.4% in September, surpassing estimates. Meanwhile, median prices went up 15% year over year. This is according to data provided by the National Association of Realtors.

RELATED: Biden Is Latest Dem to Support Ridiculous Free Housing Proposal

Shares of Redfin, a real estate brokerage firm, were higher by 1% Thursday to $45.60. The stock more than doubled during this year. It now has a market cap of $4.5 billion. 

Why do people buy houses during a recession? 

During this time when the economy is reeling and jobs are tight, people buy homes. Why? There are a couple of reasons.

The bigger acceptance for remote work freed many people from living in the city. The opportunity to leave cramped apartments and expensive city living. The pandemic gave enough reason for workers to pack up and head for greener pastures. Next, interest rates are going down hard. From 3.7%, 30-year mortgage rates are now 2.9%, the lowest rates ever. Despite higher prices, people know this is the best time to buy on the cheap. 

The intent is there. The pandemic allowed you to work anywhere. And interest rates allow you to pay the lowest interest rates. People are taking the plunge and buying. So what’s the problem? We’re running out of houses to buy. 

Demand coming from the rich 

Rich professionals who can work from home are the reason for the uptick in housing demand. Kelman said that many remote workers moved from major cities to distant suburbs. Kelman said these workers began “taking a permanent vacation where they’re working from those homes.”

People are taking advantage of low-interest rates to snap up homes. Kelman noted that “part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free.” The opportunity to buy homes for cheap may be too much to resist. “Of course, they’re going to use that money to buy homes,” he added.  

Meanwhile, there’s another group of people who would like to buy but can’t. Kleman said:  “There’s just another group of Americans who are still struggling, who can’t access the credit because we’ve raised credit standards, and you have high unemployment. I just think those two trends, at some point, have to collide.” 

Kelman foresees demand to continue until 2021 at least. Many undecided buyers will buckle down next year and take the plunge. He said: “There’s no way it can last forever. This level of demand is absolutely insane. I would expect it to last into 2021, at least.” Why 2021? “There are so many people now who have decided they’re not going to be able to buy a home by year-end,” he said. Kelman expects them to buy next year, “as their kids shift school districts. I do think we’re going to see this for some time.”

Shrinking inventory of houses for sale

With homes fast disappearing from the market, higher purchase prices are coming back. Based on data from the National Association of Realtors data, only 2.7 months’ supply of houses is available last month. This represents the lowest level since 1982 when the NAR began tracking data. 

Kleman expects supply to increase after the elections. Uncertainty will decrease after voters elect a new president. Listing and selling a home can take months to process. That’s why sellers have a lower risk tolerance than buyers. “Buyers, when they see a house they love, they pounce,” he said. “I think the sellers are just looking long term in the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”

Demand won’t last forever  

The Wall Street Journal’s Justin Lahart thinks not everybody can live outside the big cities. A remote job in a vacation spot may pose difficulties for some. Winter conditions may also make some remote workers rethink their strategy. He also believes that the housing boom now made people buy houses sooner than later. He thinks many of the workers who moved to the suburbs would’ve done so in a few years. When the pandemic subsides, a smaller group might follow the exodus out of big cities. 

The number of people who can afford houses will shrink as well. Many workers’ careers derailed during the year. Many millennials got burned during the financial crisis in the early 2000s. Now, a new career-threatening crisis is in full swing. The post-coronavirus landscape may depend on how well the economy rebounds. We’ll have next year to find out.

Watch this as CNBC reports on the US housing sales boom. Redfin CEO Says “people are buying vacation homes, then taking a permanent vacation:

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Biden Plan Could Mean 60% Tax Rates, But Here’s Who Will Get Stuck With Higher Taxes

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Biden Plan Could Mean 60% Tax Rates, But Here’s Who Will Get Stuck With Higher Taxes

New York and California may start losing high-income residents by the droves next year if Democratic nominee Joe Biden wins the election in a few weeks.

That’s because the two left-leaning states would have a combined federal and state rate over 60% under Biden tax plan.

Even New York resident and rapper 50 Cent tweeted earlier this week that despite his apparent dislike for President Trump, he said “Vote Trump” and “62% are you out of ya (expletive) mind,” when he learned about Biden’s tax plan.

According to calculations from Jared Walczak of the Tax Foundation, California residents earning more than $400,000 per year could face a combined tax rate as high as 62.6% under the Biden plan. New Jersey residents could see taxes reach 58.2% and New York would top out at just over 62%.

But somehow, it could get even worse.

Tax Rates Can Still Go Higher Under Biden

Walczak points out that if you include the contributions to the tax hikes by employers, which are often passed along to employees, the combined rates would jump to over 65% in California, 62.9% in New Jersey and 64.7% in New York City. They could still go even higher if California and New York raise taxes on high earners. This is something some legislators have proposed to try and close multibillion-dollar budget gaps.

“These rates would be the highest in about three and a half decades,” said Walzcak, “and imposed on a broader tax base than was in place previously.”

The Middle Class Will Suffer?

But Home Depot co-founder Ken Langone believes the wealthy won’t pay higher taxes at all – the middle class will.

“The middle class will not be exempt. Tragically, it will punish them. It isn’t going to punish us,” said Langone.

Appearing on Fox Business yesterday, Langone said due to Biden’s tax hikes, “the middle class will be in peril.”

He said that despite Biden saying the wealthy should pay more in taxes, the middle class will feel the effects of Biden’s tax plan. Langone said he is in favor of a tax code that is more progressive and equitable. This includes eliminating loopholes that favor the rich and large corporations.

“I don’t know if there’s any of us that have done well that will have a problem with paying more taxes, but it’s a ruse to think that hitting us and us alone is going to get the job done,” Langone said, adding ““It won’t and the middle class will be in peril and when you take money out of the hands of the middle class, you do a dramatic impact negatively on the economy.”
He said that increasing taxes on the middle class will lead to a recession.

“The problem is, when you go after the middle class, you begin to attack the backbone of the economy and we will have a bad recession. We will have a very bad recession,” Langone said.

“These are very precarious times and not the time to be screwing around,” he added.

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Market Volatility Rises As Election Polls Show Tightening Race

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Market Volatility Rises As Election Polls Show Tightening Race

The relatively calm markets earlier this month are giving way to more volatility as we approach the election. This is according to a team of strategists at JPMorgan.

“While it is perhaps true that during the first two weeks of October risk markets were supported by a widening of US presidential odds, which by itself implied a lower probability of a close or contested US election result, over the past week or so these odds have started narrowing again,” said a team of strategists at JPMorgan Chase, led by Nikolaos Panigirtzoglou.

According to recent polls by RealClearPolitics, in key battleground states, Democratic nominee Joe Biden leads President Trump by 3.9 percentage points, 49.1 vs. 45.2. That lead has shrunk from a 5 percentage point advantage for Biden about a week ago.

A general election nationwide poll by RCP shows a wider 8.6 percentage-point lead for Biden. However, there are many who feel those polls are not correcting for sampling bias.

Polls Inaccurate?

MarketWatch recently interviewed Phil Orlando, the chief equities strategist at Federated Hermes. There, he said he doesn’t believe the polls accurately reflect how close the race is. In relation to this, he pointed to the surprise win by Trump against Democrat Hillary Clinton in 2016.

“Our base case is that the polls are wrong, there’s an oversampling biased error that a lot of polls aren’t correcting for,” Orlando said.

With a tightening race for the White House, volatility has returned to the market. It will also likely increase in the final two weeks leading up to the election.

A report put out yesterday by SentimenTrader showed that the CBOE Volatility Index or VIX, jumped to levels last seen during the Great Financial Crisis, and tends to rise as stocks fall as it is typically used as a hedge against market downturns.

Market analysts use the ratio to measure how speculative traders are getting. A rise in the put/call ratio means that investors are expecting plenty of volatility between now and November 3.

The VIX, which measures investor bullish or bearishness on the S&P 500 for the next 30 days, is currently near 29, well above its historical average between 19 and 20. This week alone the VIX jumped 6.3%.

Source of Volatility

Jeffrey Mills, the chief investment officer at Bryn Mawr Trust, said some of the volatility likely comes from investors trying to position their portfolios based on who they perceive will win the election.  “There could be some front-loaded selling but I do feel like that’s a near-term phenomenon,” he said. But he says no matter who wins, there’s really only one place to invest, and that’s the stock market.

“There is going to be this continued pull toward equity markets — where else are you going to go when you need to earn a certain percentage to fund retirement, fund education?”

If investors are moving money today based on who they think will win the election, Daniel Clifton, head of policy research at Strategas Securities said each candidate will likely benefit different sectors.

A Biden victory will be good for stocks in the infrastructure, renewable energy and technology sectors, said Clifton.

If President Donald Trump is reelected, Clifton said there’s “huge upside” in some sectors. These include defense, financials and even the for-profits like prisons, education and student loan lenders.

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