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How Private White House Briefings Helped Hedge Funds

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In late February, the Trump administration was publicly playing down the severity of the worsening coronavirus epidemic. But in private, White House officials had a different story — and that information was shared with top traders who made fortuitous bets against the market.

Trump advisers conceded concerns about the coronavirus in private meetings with board members of the conservative Hoover Institution on Feb. 24, Kate Kelly and Mark Mazzetti of The Times report. Larry Kudlow, the White House’s chief economic adviser, told the group that the virus was “contained in the U.S., to date, but now we just don’t know,” hours after saying on CNBC that containment efforts were “pretty close to airtight.”

Here’s how the information then spread:

• William Callanan, a Hoover board member and hedge fund consultant, wrote a memo, noting that nearly every federal official had raised the coronavirus “as a point of concern, totally unprovoked.”

• He then described the briefings in an email to the hedge fund magnate David Tepper of Appaloosa Management. The email circulated among the firm’s employees. Mr. Callanan also tipped at least one financier client.

• The information was passed to at least two outside investors, who in turn shared some details with others. Within 24 hours, at least seven investors at four money managers had been tipped off to some version of Mr. Callanan’s debrief.

By Feb. 26, traders acted on the information, as markets tumbled. Some investors, believing everyday life was about to be upended, bet big against the market — “short everything” was one trader’s reaction — while others stocked up on household staples. Stocks started to slip that afternoon and dropped precipitously the next day. The S&P 500 fell more than 11 percent that week.

There are caveats:

• Mr. Callanan said that his email to Appaloosa was based on “extensive research and publicly available information,” and that a copy of the briefing provided to The Times was “materially different” from his original write-up.

• Mr. Tepper had been publicly warning about the coronavirus since early February. He initially denied receiving Mr. Callanan’s email, but later acknowledged it.

• Mr. Kudlow told The Times that he believed his private and public remarks were consistent.

The takeaway: The circulation of the briefing, Kate and Mark write, shows “how elite traders had access to information from the administration that helped them gain financial advantage” when global markets were teetering.

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Today’s DealBook Briefing was written by Andrew Ross Sorkin and Lauren Hirsch in New York, Ephrat Livni in Washington and Michael J. de la Merced and Jason Karaian in London.

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ImageStarbucks’ executive pay is now tied to corporate diversity measures.
Credit…Lim Huey Teng/Reuters

Steven Mnuchin says what we’re all thinking about a stimulus package. “At this point, getting something done before the election and executing on that will be difficult,” the Treasury secretary told a Milken Institute gathering after a negotiating session with Speaker Nancy Pelosi. The two plan to speak again today — but to what end?

European stocks slide amid a resurgence in virus cases. Markets are falling sharply across the continent, as officials impose new restrictions to limit the spread of the coronavirus, including curfews in Paris and a ban on mixing households in London. With an average of more than 100,000 new infections per day, Europe accounts for about one-third of new cases reported worldwide.

Goldman Sachs reports bumper earnings. The bank earned $3.6 billion in the third quarter, far higher than expected, as trading revenue soared. Banks with more consumer-facing businesses, like Bank of America and Wells Fargo, fared worse.

Wells Fargo fires employees for coronavirus aid fraud. The bank said that some employees created fake profiles to file for payments from a Small Business Administration pandemic relief program. At least 100 people have been dismissed so far as a result of the internal investigation.

Starbucks ties executive pay to diversity targets. The coffee chain said it would incorporate “measurements focused on building inclusive and diverse teams” into compensation plans starting next year, as part of a push to raise representation of Black, Indigenous and people of color in its work force. It joins a small group of companies tying pay to diversity targets.

Credit…Jim Wilson/The New York Times

Facebook and Twitter have deemed a New York Post report about Joe Biden, his son Hunter and Ukraine so dubious that they have limited access to it on their platforms. The moves brought accusations of censorship from Republicans, including President Trump. The Biden campaign has rejected the allegations made in the report, which was based on unverified material provided by Trump allies.

The details: Twitter prohibited users from sharing the story, while Facebook said it was limiting distribution until it could independently verify its content. After a day of confusion and criticism, Twitter said that the decision was based on the personal information shared in the story; Jack Dorsey, the company’s C.E.O., called the “lack of clarity” about the block “unacceptable.”

Social media platforms are scrambling to moderate widely shared content. In recent weeks, Facebook banned QAnon posts, ads opposing vaccination and content denying the Holocaust. Google-owned YouTube has also announced a ban on anti-vaccine content. This follows months of pressure to act on misinformation, stoking accusations from the right about censorship of conservative voices and leading the left to push for stronger action.

An S.E.C. event on “interconnectedness and risk in U.S. credit markets” took a literary turn, as the diverging fortunes of large and small businesses were expressed in Dickensian terms. “Credit is a kind of tale of two cities,” said Mark Carney, the former governor of the Bank of England.

“How are we doing?” asked Jay Clayton, the S.E.C. chairman who moderated a panel yesterday. “I don’t think anyone’s going to be critical,” said Gary Cohn, the former Trump economic adviser and Goldman Sachs executive, commending Mr. Clayton’s work in a difficult time. He argued for more fiscal stimulus, noting that “sequencing” issues in the last relief effort — “who got what when, who got theirs first” — had made it harder for small businesses to get aid than bigger players that weren’t as desperate. For all the interconnectedness of the markets, Mr. Carney said, there is minimal “trickle down” to the smallest players.

• In a research note this week, Goldman analysts noted the widening divergence between corporate bond spreads (easing) and bank loan availability (tightening). “While easier conditions in public credit markets are a welcome relief for larger companies that have access to them, small businesses — who are more reliant on bank financing — do not currently have the same easy access to credit,” they wrote.

Things get philosophical. At the roundtable, Mr. Clayton responded to criticism of continuing market dislocations by paraphrasing Voltaire, reminding the group not to let the perfect be the enemy of the good. But Glenn Hutchins, the billionaire co-founder of Silver Lake, said that the economy had shifted from a crisis phase to the “grind” of a recession, and that mismanagement of the pandemic could lead to “a real credit problem in the real economy.”

Credit…Pool photo by Stefani Reynolds

The technology giant came up unexpectedly during the Senate Judiciary Committee’s questioning of the Supreme Court nominee Amy Coney Barrett yesterday, highlighting corporate funding to secretive groups that try to influence the judiciary.

Friends of the court? Senator Sheldon Whitehouse, Democrat of Rhode Island, asked Judge Barrett if she was aware of donations to “pop-up” organizations that write amicus briefs in support of companies’ interests but do not reveal their financial connections. He noted Oracle’s donation of as much as $99,000 to the Internet Accountability Project, which filed a Supreme Court brief this year backing its copyright case against Google.

• The I.A.P. was founded in 2019 by the conservative advocate Mike Davis, a former adviser on judicial nominations for the Senate Judiciary Committee. (Its website features a “Google is Evil” page.) The organization is transparent about its stance but coy about its funding: it operates as a 501(c)(4), or “dark-money” group, exempt from disclosures. Its ties to Oracle were spotted by reporters in a disclosure by the tech company.

Amicus briefs are a legitimate part of a public relations arsenal, but some companies also fund outside groups that try to sway the court without revealing their ties — Oracle is not alone in that. Judge Barrett said she was unaware of this issue. But that is the point of dark money, after all.

Credit…Hiroko Masuike/The New York Times

Literally. The co-working company’s parent is once again calling itself WeWork as it — and its notorious co-founder, Adam Neumann — attempts a comeback.

Goodbye, “The We Company.” The company is reverting to the WeWork name, Reuters reports, abandoning the brand devised to show it was expanding beyond office space. (It paid $5.9 million to Mr. Neuman to license the name, though he later refunded the money.) The move is meant to return WeWork to its roots, the company’s C.E.O. wrote in a memo.

• The change also comes as WeWork tries salvage its core business, which has been ravaged by the pandemic. The company is offering steep discounts to tenants on a case-by-case basis, according to The Financial Times.

Mr. Neumann has also returned to the spotlight. His family office invested $30 million in Alfred, a start-up that provides services like a concierge and maintenance request software to residential buildings. It’s his first major foray into public life since resigning from WeWork last fall after its failed I.P.O. and near-collapse.

Deals

• The private equity billionaire Robert Smith has reportedly agreed to pay $140 million to settle a criminal tax investigation. (WSJ)

• ConocoPhillips is reportedly in talks to buy Concho Resources, in what would be one of the biggest oil and gas takeovers this year. (Bloomberg)

• Shares in Big Hit Entertainment, the music agency behind the Korean pop band BTS, nearly doubled in a market debut, valuing the company at more than $8 billion. (NYT)

Politics and policy

• Joe Biden raised a record $383 million last month, giving him $432 million in the bank in the final days before the election. (NYT)

• The media intrigue behind dueling town halls for President Trump and Mr. Biden. (NYT)

• Britain’s most popular politician might be its finance minister, the former Goldman Sachs banker Rishi Sunak. (NYT)

Tech

• France and the Netherlands urged the E.U. to enact strict regulations on American tech giants. (FT)

• A hot new commodity on the dark web: brokerage account logins, with Robinhood user data fetching the highest prices. (CNBC)

Best of the rest

• Motel 6, Home Depot and others have cut ties with the ad agency Richards Group after its founder called one ad “too Black” in an internal meeting. (NYT)

• Senator Elizabeth Warren criticized Disney for laying off thousands of workers while buying back shares and giving big payouts to top executives. (Bloomberg)

• Will Amazon’s Prime Day hurt the U.S. Postal Service’s ability to process mail-in ballots? (WaPo)

Thanks for reading! We’ll see you tomorrow.

We’d love your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

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These Are the Core Elements Needed to Successfully Pivot Your Business

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October 19, 2020 6 min read

Opinions expressed by Entrepreneur contributors are their own.

The says that the may be facing its most massive contraction since the Second World War. The massive amount of job cuts in line with the slowing of the US economy has made one fact obvious. Businesses facing this dire situation have had to adapt or face their demise.

Companies looking at changing their models to adapt to the crisis have been using the term “pivoting” extensively. We already know that a pivot is a hinge point that allows you to exert less force to move a heavy object. Inc. notes that, in , it’s a point that a company can leverage to grow itself and explore a new market related to its core product. In essence, it allows a business to develop laterally in the market. Several well-known enterprises have successfully pivoted during the pandemic, demonstrating that it can be done quite successfully once a company has a plan. Extending a business’s capabilities with the aim of long-term profitability and is what has driven so many enterprises to consider pivoting into related markets.

Related: 3 Big Ways Companies Are Pivoting

Enterprises pivoting to adapt

Pivoting successfully relies on seeing that the business has a problem and addressing it head-on. Believe in Banking mentions that changed its business model from being a music provider to being a tastemaker and podcast distributor. Initially, Spotify’s business model depended heavily on free users listening to ads. However, as the pandemic worsened, businesses had less income to devote to an ad budget. As a result, companies like Spotify that relied on that revenue were left out in the cold.

Instead of fighting for an ever-decreasing portion of the ad revenue pie, they decided to shift their focus. The company already had an audio distribution platform. Now it was time to monetize those free users by building original content. In a move that mirrored a few years ago, Spotify started buying up the sole rights to popular podcasts and drawing in users because of this exclusive content. In effect, the company found it’s pivot and shifted gears, without even needing to rethink its business strategy extensively.

Successful small business pivots

Corp Magazine notes that that have been hit by the Covid crisis are also pivoting into the online sphere. Some of these entrepreneurs already had companies that were forced to close their doors. Instead, they decided to their focus to teaching others and giving them an online platform to showcase their goods.

Related: 4 Tips For Pivoting Your Brand in the Current Crisis

These small businesses rely on trade shows, and other in-person meets to sell their products and increase their distribution. Online platforms offer them a chance to share the connections they made before the US government’s economic halt, in the hopes they could help other small businesses thrive. Companies like Moxe that already have an online presence have invested more in promoting their storefront than distribution to real-world locations.

Other small businesses have realized that the need for specific products remains, but getting them is not nearly as easy as they used to be. Smart farmers that have lost access to their primary market of upper-class restaurants can pivot into supplying directly to customers. Restaurants that no longer have customers to serve can either invest in a mobile app provider for delivery or offer their services as a “ghost kitchen.” These are extensible and long-term adaptations that ensure the business still has an income while the pandemic (and the associated economic slowdown) lasts.

The Core elements needed to pivot successfully

When a company intends to pivot, it needs to be aware of three key factors:

1.     Understand a pandemic-fueled trend

Because people have changed how they work, play, and shop, the only way a pivot would be successful is to consider the new trends in these areas. Remote work, along with an increased dependence on technology due to social distancing, provides ample opportunity to businesses who want to find new, exciting ways to capitalize on their market. Companies have shifted to using online storefronts and mobile apps to interact with customers. Those that embrace this new digital lifestyle stand to outpace their competition that is patiently waiting for physical meeting spaces to reopen.

2.     Extend the company’s existing business model

Successful pivoting doesn’t rely on entering a brand new space. Some companies are associated with doing certain things. Prada, for example, is known for making fashionable accessories. If a company needs to be successful in their pivot, they should look at related areas to their primary product. Prada’s new line of designer face masks shows that they leveraged their brand awareness to produce a viable product that appeals to a post-pandemic world.

3.     Pivots must be profitable and sustainable

If a business intends to pivot, it needs to be both profitable and sustainable. The product or service the company offers must preserve and enhance brand value, and encourage customers to buy into the new idea. Over time, the business will be able to switch over from its initial profit generation business model into a new one that’s sustainable over the long term in a Covid-affected world.

Related: The Pivot That Helped This Founder Get Into 10,000 Stores

Getting rid of inflexible businesses

While the economic depression the world will face is a scary prospect for businesses, it also offers a ray of hope. Inflexible companies will be the first ones to fold. Those that can’t adapt to the “new normal” will end up paying the price for building a rigid business model based on the idea that change will never come. The changing world will reward businesses with the foresight and the ability to change how they do business quickly.

Times of crisis tend to favor small businesses that can change their configurations quickly. Larger businesses that have to go through layers of bureaucracy tend to be much slower when they have to change. Pivoting allows a company to redirect itself while maintaining its momentum. During this pandemic, it’s the most effective method of ensuring that a business remains profitable over the long term.

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Ne-Yo Banks on Partnership With New Streaming Music App

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The R&B superstar talks about why he joined forces with LÜM and how it differentiates from the pack.

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October 19, 2020 4 min read

Opinions expressed by Entrepreneur contributors are their own.

Making it in Hollywood requires an entrepreneurial tenacity similar to that of Silicon Valley. Yet while both cities are in California, they’re worlds apart. The music industry is continuously being disrupted by new technologies innovated by entrepreneurs in Silicon Valley. Instead of swimming against the stream, Grammy-winning R&B star Ne-Yo has decided to jump in and work hands-on with a newly launched music app that’s getting artists paid.

The multi-platinum performer has announced his partnership with LÜM, a streaming and discovery application that enables emerging musicians to grow their fan base and make money with its in-app currency feature called called virtual gifting. It’s a model whereby greater community participation leads to greater rewards, allowing artists to leverage the service as an entrepreneurial tool.

Ne-Yo’s collaboration with LÜM differentiates from, say, Jay-Z’s approach to launching Tidal, which swam upstream by pulling the rap mogul’s music from Spotify (though he later reversed course on that). And it’s been informed by other music-and-tech cautionary tales, such as when U2 had their album pre-installed on all new iPhone 6 devices, to much consternation.

But those were early days. Today, the transition from successful recording artist to tech tycoon has become much more sophisticated. And by linking up with LÜM and its virtual-gifting platform, Ne-Yo has set out to be a leader amidst the hottest trend in technology, cryptocurrency, which is set to disrupt a financial services market that’s expected to reach $26.5 trillion by 2022.

Related: Wyclef On Staying Creative in the Pandemic, and Why He Loves Working With Women

“Tech has come to play a huge role in our lives, sometimes for the better, but sometimes disrupting systems that might have been better off left intact,” Ne-Yo told me in a recent interview just prior to LÜM rolling out its web and Android platforms. “Rather than complain about the challenges we’re facing as artists, it’s important for us to find new opportunities and embrace those tools that can help us rewrite the rules in a way that preserves the arts.” 

Artists can upload their content to the app, where fans can discover artists and circulate music by re-sharing songs with their friends so that the app becomes an ecosystem of digital assets traded and sold with its virtual currency, incentivizing artists to earn income. “LÜM is one of those rare tools — it’s totally changing the music landscape for artists who are struggling to make an income,” Ne-Yo added. “It’s laying the groundwork for independent artists and fans alike to see what the future of music can look like for them.”

LÜM’s virtual-gifting service is available without a minimum threshold of followers or video views. That’s in contrast to platforms like TikTok that maintain high thresholds, which makes this revenue channel unavailable to newly starting out/up-and-coming artists. As LÜM co-founder and CEO chimed in during our interview, “The virtual gifting feature has enabled us to provide tens of thousands of independent creators a new way to look at their careers — to help them build stronger relationships, network, collaborate and make real money.”

Related: Jermaine Dupri Talks New Role With The Beet and a Lifetime of Entrepreneurial Inspirations

Time will tell if LÜM meets Ne-Yo’s expectations, but the gambit is further proof that being an artist and an entrepreneur are two sides of the same coin.

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The Association of Entrepreneurs of Mexico will hold its annual summit on October 22

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The event will bring together entrepreneurs, investors, academics and representatives of the Senate and the Federal Government.

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October 19, 2020 4 min read

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

Next Thursday, October 22, the third Summit of Entrepreneurs of the Association of Entrepreneurs of Mexico (ASEM) will be held and this time they invite the country’s entrepreneurs to participate for free.

“Entrepreneurs are founders of companies that today are the country’s main employer and the engine of the economy. To the extent that we create conditions to promote entrepreneurship, we will be able to trigger the creation of more jobs, attract investment and contribute to GDP growth to accelerate economic recovery, ”says Jorge Corral, executive director of ASEM.

Each year, this summit will focus on the challenges that COVID-19 put to companies, the future of entrepreneurship and generating alternatives and support for the sector.

ASEM invites to attend the Summit all entrepreneurs and businessmen in the country, investors, representatives of accelerators, incubators and other entities that support entrepreneurship, and those who are considering undertaking. The transmission will begin at 6:00 p.m. through the WebinarJam platform. It will be a free event and those interested can register at this link .

The event will bring together entrepreneurs, investors, as well as representatives from the financial sector, academia, the Senate and the Federal Government. It will have three main activities:

  • Panel “financing alternatives for entrepreneurs”. As it is one of the priority issues for entrepreneurship, the current context of access to financing will be addressed, both for commercial banking and fintech alternatives, as well as expectations in the short and medium term and the actions that must be implemented from the beginning. public and private sector to guarantee greater access to financing.
  • Presentations of entrepreneurs overcoming the changes. Leading entrepreneurs from different industries will share how they have reinvented themselves and managed to grow in the current context.
  • Panel “programs and legislation for the economic reactivation of companies”. It will include talks with entrepreneurs, academics and representatives of the government and the Senate, since they are an important axis for economic reactivation through reforms or creation of laws and the implementation of programs. Best practices in these matters will also be shared globally.

Among the panelists and speakers will be Héctor Sepúlveda, co-founder of Mountain Nazca and investor in Kavak, the first Mexican startup valued at more than 1,000 million dollars; Dr. Ana Bárbara Mungaray, head of the Productive Development Unit of the Ministry of Economy; Ricardo Weder, founder of Jüsto; Senator Indira Kempis, member of the Economy Commission and of the Senate pro-entrepreneurship bench; Fernando Padilla, national president of ASOFOM; Diana Molina, Stripe’s Strategic Alliances Leader for Latin America; and Luis Ricardo Alvarez, executive director of Santander PYME, among others.

The purpose of having this plurality of voices is that the talks do not remain only in a conversation, but that they generate commitments and proposals to improve the environment in which business is undertaken and done in the country.

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