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There's an 'imminent' correction coming to New York City retail

Flickr/Erik Drost When 685 Fifth Avenue hit the market two years ago, investors practically lined up around the block. The building’s roughly 25,000-square-foot retail space — which sits on the corner of 54th Street — came with 152 feet of frontage in the heart of Manhattan’s most profitable shopping district. Best of all, the property’s only retail tenant, Gucci, was about to leave, allowing any buyer to sign a new tenant in a neighborhood where asking rents were growing at an annual average of 8 percent. Who wouldn’t want to get in on that? Joseph Sitt’s Thor Equities and the shopping mall giant General Growth Properties, helmed by Sandeep Mathrani, certainly did. In July 2014, the two firms joined forces and paid $475 million for the 20-story building, which also includes 90,000 square feet of office space. Soon after, the partners began actively marketing the property’s retail. According to sources familiar with the project, however, reality has not quite lived up to expectations. In February, the owners landed the luxury fashion designer Coach as a tenant for a 10-year lease with a rent of about $4,000 per square foot. While that may seem like a major coup, sources say Thor and GGP had to offer deeper concessions than expected: The landlords agreed to pay for the space’s build-out, which can cost up to $1,000 per square foot for a prime retail location. And in the end, Coach didn’t take the entire ground-floor space, leaving the building’s owners with about 900 remaining square feet. “On the face value it looks like they got a very high rent, but if you count in concessions it looks different,” said Faith Hope Consolo, chair of the retail division at Douglas Elliman. A representative for Thor declined to comment. Flickr/Erik Drost Thor and GGP will still collect about $20 million in annual rent for the retail space, according to one source, and the partners entered contract to sell the building’s office portion to the Turkish real estate and jewelry company the Gülaylar Group for $160 million in March, meaning their initial investment will likely net them a hefty overall profit. But the concessions offered to Coach point to a broader concern in Manhattan’s retail market: Luxury and non-luxury tenants are becoming less willing to pay the kinds of rents owners demand. These days, hardly a week goes by without a new report about struggling retailers and rising vacancies in Manhattan. Average retail asking rents fell year over year in seven of the borough’s 12 main retail submarkets in the first quarter of 2016, according to Cushman & Wakefield. And several prime shopping districts now have availability rates well over 20 percent, while stretches on Bleecker Street and Broadway have become notorious for their empty storefronts. These signs of trouble are coinciding with record spending by retail investors and the rise of the retail condo. Investors have shelled out $25 billion on Manhattan retail properties since the beginning of 2011, according to data from Real Capital Analytics. And in recent years, buyers have been more willing to dig deeper into their wallets and accept higher per-square-foot prices — forcing them to find tenants willing to pay high rents to justify their purchases. Since 2000, RCA’s database counts 24 Manhattan retail condo sales that were priced at $10,000 per square foot or more. All of them closed after July 2011 and 17 closed in 2014 and 2015. “I don’t want to say it’s a bubble but it’s been constantly bid up for six years,” Lee & Associates Managing Principal Peter Braus told The Real Deal. Consolo added that retail condo sales prices have gone into the “stratosphere” in recent years. “It is clear that there were numbers that were far too aggressive and the market just couldn’t keep up,” she said. What goes up … While real estate insiders are reluctant to call it a retail bubble, many acknowledge that a correction is imminent. Michael Weiser, president of commercial brokerage GFI Realty Services, said the best indicator of whether Manhattan’s retail market is weakening is vacancy. Availability rates — which measure the amount of retail space that is vacant or will become available — rose in all but one of Manhattan’s main retail submarkets between the first quarters of 2015 and 2016, according to Cushman. Among those neighborhoods, several stand out: On Fifth Avenue between 42nd and 49th streets, a staggering 31 percent of retail space was available for lease. Meanwhile, Soho clocked in with a 25 percent availability rate followed by Herald Square and the Meatpacking District (both at 22 percent), Times Square (20 percent) and Madison Avenue (17 percent). Braus said that owners who paid a steep price for retail space are more reluctant to accept lower rents. “That’s one reason why you’re seeing a lot of vacancies in those neighborhoods,” he noted. As it happens, those six districts were also home to the bulk of the priciest Manhattan retail purchases in the last two and half years, accounting for 57 of the 73 sales priced at $100 million or more recorded by RCA since January 2014. (That excludes office properties with retail components.) They are also among the neighborhoods where asking rents saw the steepest rise over the past two years, the numbers from Cushman & Wakefield show. Flickr/Erik Drost Between mid-2010 and mid-2015, asking rents almost quadrupled around Times Square, tripled on Fifth Avenue between 42nd and 49th streets and jumped by about 90 percent in Soho and on Madison Avenue. By comparison, retail asking rents in other areas such as the Upper West Side and on Third Avenue grew by about 35 percent in the same time span. In other words, the submarkets struggling the most with high availability rates today are those where investors spent the most on retail properties compared to previous years and where landlords jacked up their asking rents at a faster pace. Some brokers argue that those two factors get to the heart of Manhattan’s retail conundrum: Investors have been overpaying for store space. In order to make a profit, they now need to charge rents that few tenants — even high-end brands — can afford. Without the ideal location and ideal tenant, many of those investors “will not get the kind of money they need to make returns,” said office and retail broker Norman Bobrow, who heads his own Madison Avenue-based firm. “I believe people are making mistakes,” he told TRD. “They are daydreaming.” Some observers don’t just fear that many retail investors overpaid, but argue that they are betting on a dying asset class. “If there’s one area that I’m concerned about, it’s retail,” real estate investor and former New York Governor Eliot Spitzer said in June at a conference hosted by the Israeli Building Center, adding that he does his shopping on Amazon nowadays. Bobrow said he believes Manhattan’s retail market is at the beginning of a long decline and that the worst has yet to come. “As for the regular New Yorkers, I find less and less of them going into stores,” Bobrow said. To be sure, plenty of luxury and non-luxury retail tenants continue to ink leases throughout the city. Meanwhile, the outer boroughs have been experiencing a retail renaissance with a growing number of artisanal shops and restaurants in neighborhoods such as Downtown Brooklyn and Long Island City. Still, the retail skeptics have plenty of evidence to point to. Major retailers including the Gap and Macy’s — both of which occupy large Manhattan spaces — saw their sales drop by 5 and 5.6 percent, respectively, year over year in the first quarter. Meanwhile, Ralph Lauren in June announced it would cut 8 percent of its workforce. All three firms announced store closures this year. Macy’s, whose flagship store by Herald Square is arguably Manhattan’s most famous retail space, announced mass layoffs in January. And in May, Amazon overtook the department store chain as the largest clothing seller in the U.S. Flickr/Erik Drost The struggles retailers are facing combined with rising rents in the city have already begun to impact Manhattan’s retail landlords. In May, Aéropostale filed for bankruptcy and announced it would close its 19,000-square-foot store at SL Green’s 1515 Broadway, where it had signed a lease in 2010. And last year, Toys R’ Us ditched more than 100,000 square feet of flagship retail space at Charles Moss’ 1514 Broadway, where the company had been an anchor for 16 years. Managing expectations If store closures continue, the supply of available retail space could spike and drag down prime rents, some industry players noted. That would be an unwelcome turn of events for retail owners. Since the beginning of the recovery following the last financial crisis, New York’s biggest retail investors have been pouring billions of dollars into the sector, fueling what some call “frothiness” if not an outright price bubble. Jeff Sutton, for one, has purchased $2.96 billion worth of prime Manhattan retail properties in 18 deals over the past five years, according to RCA, which found that he was the most active investor in the sector during that time period. Indeed, Sutton’s Wharton Properties was a key player in the priciest retail acquisition in New York history: the $1.3 billion purchase of the Crown Building’s retail space in May 2015 in partnership with GGP. And in September 2015, Sutton and Bobby Cayre’s real estate investment firm Aurora Capital Associates signed a 99-year triple-net lease for 511 Fifth Avenue in Midtown in a deal valued at $174 million in public records. But since then, the king of Manhattan retail has been a bit quieter on the retail front. Following Sutton on RCA’s tally are GGP, Vornado Realty Trust and Thor, which bought 44 Manhattan retail properties (more than any firm) over the past five years. But many of the biggest players are slowing down on their acquisitions, while others are beginning to sell off assets in large quantities. That includes Thor, which is looking to unload multiple properties on Fifth Avenue and elsewhere. GFI’s Weiser said companies such as Wharton, Thor, Vornado and GGP would have little trouble withstanding a retail market correction thanks to their size. Similarly, other long-term owners are also cushioned due to their low cost basis, he noted. But while the big players are likely to be fine, the ones in the middle will be squeezed, Weiser said. Lenders who’ve bet big on Manhattan retail could suffer too. In a recent report, the rating agency Morningstar Credit Ratings analyzed 231 commercial mortgage-backed securities (CMBS) loans tied to retail properties occupied by the financially strapped Gap. Morningstar found 14 loans on properties where Gap occupies more than 80 percent of the space on a lease that expires within the next two years, which could put landlords and the investors in those loans at risk if the company decides to close more stores. Two of those properties — the Shops at Bruckner Boulevard in the Bronx and 31-48 Steinway Street in Astoria — are located in New York City, just outside of Manhattan. At press time, six CMBS loans tied to New York City retail properties were in special servicing, according to the CMBS research firm Trepp. The aggregate book value of those loans is less than $70 million. But that number could rise, due to falling rents and rising vacancies, according to sources. “If you acquired your retail property in the past two years, you are in this situation where if you don’t hit certain minimum rents, it can be to the detriment of your business plan and the underlying mortgage,” said one mortgage broker who asked to remain anonymous. Additionally, a retail decline could have a big impact on new residential development throughout the city. The perceived value of ground-floor retail has been a big factor in helping to fan New York’s most recent residential construction boom, allowing developers to justify high prices on land and to underwrite big construction loans. That’s because returns on retail tend to be significantly higher than returns on apartments, especially on lower floors, where the retail is housed. As a result, developers have tried to squeeze as much retail as possible into their projects. Harry Macklowe is including three stories of retail in his condo conversion at One Wall Street and nearly 30,000 square feet of retail at his ground-up condo skyscraper at 432 Park Avenue. One residential broker, speaking on the condition of anonymity, said the reliance on pricey retail space could put condo developers at risk, as a surge of new supply begins to drive down retail values. Yet, Manhattan’s high-profile condo and office development projects are relying on big luxury retail chains more than ever. Extell Development’s Central Park Tower at 217 West 57th Street — which has yet to secure a construction loan — has locked in a 363,000-square-foot Nordstrom department store as its anchor tenant. And a 250,000 square-foot Neiman Marcus store will anchor Related Companies’ and Oxford Properties Group’s 1-million-square-foot retail complex at Hudson Yards on Manhattan’s Far West Side. But both retailers are having a tough year amid rising online competition. Flickr/Erik Drost Neiman Marcus saw its earnings plummet 81 percent year over year in the first quarter, while Nordstrom’s profits fell by 64 percent. There is no indication that these lackluster numbers will have any impact on the retailers’ commitment to those two projects, but the drop doesn’t exactly instill confidence either. As for the other high-priced retail space hitting the market, “you can’t have that many flagship stores,” said Braus of Lee & Associates. “What’s going to fill up all of these stores?” He argued that Manhattan’s retail market is turning into a two-speed highway. Companies like Apple, whose stores offer enough gadgets and design to double as entertainment venues, will remain in the fast lane, Braus said. As a result, landlords who can offer those tenants locations with heavy foot traffic and the right layout can still demand high rents. But there are only so many of those retailers to go around. And there are a lot of tenants (including bookstores and some clothing retailers) in the slow lane. “A lot of that is just the changing landscape,” said commercial broker Adelaide Polsinelli of Eastern Consolidated. “It’s survival of the fittest.” Bulls to the rescue? A s Thor and GGP were putting the finishing touches on their lease with Coach at 865 Fifth Avenue, Thor began quietly marketing a big chunk of its Manhattan commercial portfolio. That has led some observers to speculate that the company is effectively calling a retail market peak. But early signs may indicate otherwise. In May, Thor sold its office and retail building at 693 Fifth Avenue to French Billionaire Marc Ladreit de Lacherriere for $525 million — almost four times the $142 million Thor paid for the building in 2010. Longtime retail broker John Brod of ABS Real Estate Partners said he believes Thor won’t have much difficulty selling the other properties either. “To Thor’s credit, when they do sell they’re actually doing a lot better than if they would have rented them out,” he said. Five Manhattan retail properties sold for more than $100 million between January and May, the same amount as a year earlier. The first few months of 2016 also saw the third and fourth most expensive retail condo sales in the city’s history — 139 Spring Street to Invesco for $25,843 per square foot and 106 Spring Street to the Carlyle Group for $17,559 per square foot, according to RCA. All of that activity raises a fundamental question: Why is an industry widely considered to be struggling such a booming asset class in real estate? The most obvious answer is that many investors and observers don’t believe that retail is in trouble, at least not in Manhattan. After all, people have been predicting the end of brick-and-mortar stores for two decades while demand for Manhattan retail space continued to grow. “I think the Internet is more of a factor outside of the urban areas; that’s where the big mall developers are going to have to be creative,” said Robert Futterman, head of the retail brokerage RKF. Retail bulls argue that even if brick-and-mortar sales continue to decline across the country, Manhattan will stay strong because so many companies use their retail space as showcases to establish and promote their brands. “It’s less about making money and more about advertising,” said GFI’s Weiser. “As a general rule, flagship stores don’t have to be profitable.” In addition, compared to worries over a slowdown in the condo and office markets, the retail softening might not be that bad. Ronald Dickerman, whose firm Madison International Realty owns stakes in 2.5 million square feet of retail space across New York City, argued that retail today offers better returns than office space. The more nuanced explanation for retail’s popularity among investors has less to do with Manhattan market fundamentals and more to do with the global flow of capital. In an age of loose monetary policy, there is an abundant amount of capital-chasing investment opportunities. As a comparatively stable asset, real estate holds particular appeal and buying retail properties is one of the easiest ways to invest a lot of money in real estate. While apartment, office and hotel properties are complex and require plenty of maintenance, smaller retail properties and condos generally take care of themselves once they are leased out. This makes retail attractive to wealthy families and funds that want to invest in real estate but don’t want to spend time and resources hiring facilities teams or battling residential tenants in court. “Retail is seen as less intense and less involved in terms of management,” said Weiser, adding that this makes retail properties an attractive proposition for anyone who has to spend a lot of money quickly. In that sense, prime Manhattan retail condos share some similarities with the housing market in the mid-2000s. Much like securitized residential mortgages prior to 2008, many see New York retail as a safe, low-maintenance asset that will almost inevitably rise in value in the long term, as it has in the past. Does this mean retail prices could become similarly inflated as housing prices pre-2008 and ultimately crash? Dickerman doesn’t think so. “I would rather make a retail investment today than an office or residential investment,” he told TRD. “It’s clear that my grandchildren will walk down 52nd Street and have a retail experience.” Still, he acknowledged that some recent retail investors may have been paying a steep price. “If you’re talking about a 2 percent cap rate for the St. Regis retail space, you’re going to have to justify some pretty substantial rent growth,” he said. Others have deeper concerns about the impact of a major correction. Braus said that if the retail malaise continues, defaults and other problems could soon follow. “There will be people left standing without a chair when the music stops,” he said.NOW WATCH: An exercise scientist reveals how to get six-pack abs

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Marvel's new Iron Man is going to look completely different

Marvel Tony Stark is out, and Riri Williams is in. A black woman is taking over Stark's Iron Man suit as part of Marvel's " Marvel NOW!" relaunch this fall. Williams is a 15-year-old student at MIT who comes to Stark's attention when she builds her own Iron Man suit in her dorm. "Her brain is maybe a little better than his," Brian Michael Bendis, Williams' creator, told TIME. "She looks at things from a different perspective that makes the armor unique." This is the latest addition to Marvel's plans to diversify its classic superheroes. There's already a female Thor, a Muslim-American Captain Marvel named Kamala Khan, and a black Latino Spider-Man named Miles Morales — who was also created by Bendis. Though many see the new additions as a a step forward in Marvel's long tradition of making white men the superheroes, there is still pushback to the new class of diverse heroes. "Some of the comments online, I don’t think people even realize how racist they sound," Bendis said. NOW WATCH: 'Hamilton' creator Lin-Manuel Miranda paid tribute to the Orlando shooting victims with a stirring speech

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San Francisco's housing bust is becoming 'legendary'13

Shutterstock The San Francisco housing bubble – locally called “Housing Crisis” – needs a few things to be sustained forever, and that has been the plan, according to industry soothsayers: an endless influx of money from around the world via the startup boom that recycles that money into the local economy; endless and rapid growth of highly-paid jobs; and an endless influx of people to fill those jobs. That’s how the booms in the past have worked. And the subsequent busts have become legendary. The current boom has worked that way too. And what a boom it was. Was – past tense because it’s over. And now jobs and the labor force itself are in decline. Until recently, jobs and the labor force (the employed plus the unemployed who’re deemed by the quirks of statistics to be looking for a job) in San Francisco have been on a mind-bending surge. According to the California Employment Development Department (EDD): The labor force soared 15% in six years, from 482,000 in January 2010 to its peak of 553,700 in March 2016. Employment skyrocketed 23%, from 436,700 in January 2010 to its peak of 536,400 in December 2015. That’s nearly 100,000 additional jobs. This increase in employment put a lot of demand on housing. Low mortgage rates enabled the scheme. Investors from around the world piled into the market. And vacation rentals have taken off. As money was sloshing knee-deep through the streets, and many of the new jobs paid high salaries, the housing market went, to put it mildly, insane. But the employment boom has peaked. Stories abound of startups that are laying off people or shutting down entirely. Some are going bankrupt. Others are redoing their business model to survive a little longer, and they’re not hiring. Old tech in the area has been laying off for months or years, such as HP or Yahoo in Silicon Valley, where many folks who live in San Francisco commute to. So civilian employment in May in SF, at 533,900, was below where it had been in December. The labor force in May, at 549,800, was below where it had been in July 2015. Some people are already leaving! The chart shows how the Civilian Labor Force (black line) and Civilian Employment (red line) soared from January 2010. As employment soared faster than the labor force, the gap between them – a measure of unemployment – narrowed sharply. But now both have run out of juice: Shutterstock During the dotcom bust, the labor force and employment both peaked in December 2000 at 481,700 and 467,100 respectively. Employment bottomed out at 390,900 in May 2004, a decline of over 16%! The workforce continued falling long past the bottom of employment. SF is too expensive for people without jobs to hang on for long. Eventually, they bailed out and went home or joined the Peace Corp or did something else. And this crushed the SF housing market. But by the time the labor force bottomed out in May 2006 at 411,000, down 15% from its peak, the new housing boom was already well underway, powered by the pan-US housing bubble. In SF, this housing bubble peaked in November 2007 and then imploded spectacularly. So now, even if employment in San Francisco doesn’t drop off as sharply as it did during the dotcom bust, in fact, even if employment and the labor force just languish in place, they will take down the insane housing bubble for a simple reason: with impeccable timing, a historic surge in new housing units is coming on the market. According to the SF Planning Department, at the end of Q1, there were 63,444 housing units at various stages in the development pipeline, from “building permit filed” to “under construction.” Practically all of them are apartments or condos. This chart shows that the development boom is not exhibiting any signs of tapering off. Planned units are entering the pipeline at a faster rate than completed units are leaving it; and the total number of units in the pipeline is still growing:Shutterstock Many units will come on the market this year, on top of the thousands of units that have hit the market over the last two years. Once these 63,444 units are completed – if they ever get completed – they’ll increase the city’s existing housing stock of 382,000 units by over 16%. If each unit is occupied by an average of 2.3 people, these new units would amount to housing for 145,000 people. This is in addition to the thousands of units that have recently been completed as a result of the current construction boom, many of which are now on the market, either as rentals or for sale. This surge in new, mostly high-end units has created an epic condo glut that is pressuring the condo market, and rents too, to where mega-landlord Equity Residential issued an earnings warning in June, specifically blaming the pressures on rents in San Francisco (and in Manhattan). Manhattan’s condo glut also has taken on epic proportions. Sales of apartments in the second quarter dropped 10% year-over-year, to the lowest since 2009. And condo prices plummeted 14.5% in 3 months. Ugly!NOW WATCH: An exercise scientist reveals exactly how long you need to work out to get in great shape

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Margot Robbie reveals the ‘super power’ Harley Quinn brings to the table in 'Suicide Squad'

Warner Bros. David Ayer's Suicide Squad will hit theaters in less than a month, and with that in mind, all eyes are on the upcoming supervillain team-up film to pave the way for the future of the DCEU. Task Force X has already managed to capture the imagination of the movie-going audience, and we're beyond excited to see certain fan-favorite baddies take center stage in the unorthodox film. One such character is Margot Robbie's psychiatrist turned psychopath Harley Quinn. However, on a team featuring an expert marksman and a human crocodile, what does she bring to the table? It now seems that we have a definitive answer to that burning question. Warner Bros. During a recent interview with Vanity Fair, Margot Robbie opened up about the particular skill set that Harley Quinn brings to the titular team of Suicide Squad: She loves causing mayhem and destruction. She's incredibly devoted to the Joker. They have a dysfunctional relationship, but she loves him anyway. She used to be a gymnast — that's her skill set when fighting. Based upon this quote, it seems that Harley Quinn will, in many ways, represent the wild card of Task Force X in the upcoming DC film. Her psychotic nature gives her an aura of unpredictability, which in turn gives her a tactical advantage over her enemies. That shouldn't come as a surprise to anyone who knows the character, as she has almost always been depicted as a woman who shares the Joker's love for chaos, carnage, and destruction. Additionally, she has the useful agility and quickness inherent to a former gymnast that allows her to go toe-to-toe with much bigger and stronger enemies — a trait consistent with her depiction in the comics, cartoons, and even the Arkham video game series. That being said, we don't think she'll last very long if and when she faces off against Ben Affleck's Batman. Warner Bros. One of the more notable aspects of Margot Robbie's quote comes when she mentions the Clown Prince of Crime. Although she will likely remain separated from her beau for the majority of the film, it seems that Harley Quinn will remain fiercely loyal to Mr. J whiles he does Amanda Waller's bidding. Such devotion and loyalty could ultimately make her a liability to men like Deadshot and Rick Flagg throughout the course of the film, as the trailers have explicitly shown her going off on her own during the mission. Margot Robbie's statement about Harley Quinn's abilities has only added to our mounting anticipation for the imminent release of Suicide Squad. Although the DCEU currently remains on shaky ground after the lukewarm performance of Batman V Superman: Dawn of Justice, the stage seems set for this film to explore the silver screen DC universe and pave the way for even greater adventures in the future. In a summer where so many blockbusters have fallen flat, a badass wild card like the former Dr. Quinzel might be just what audiences need right now.NOW WATCH: Margot Robbie’s crazed Harley Quinn steals the show in the new ‘Suicide Squad’ trailer

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A Silicon Valley mogul says a world with trillionaires is inevitable — here's how it'll happen

Charlie Crowhurst / Stringer / Getty Images With an estimated net worth of $75 billion, Bill Gates, the richest person on Earth, would need to add another $925 billion to his fortune before becoming the first trillionaire in history. As implausible as it may sound, one Silicon Valley entrepreneur believes such an achievement isn't just doable, but over the next several decades, inevitable — and it won't necessarily be Gates who gets there. "We need to be ready for a world with trillionaires in it," says Sam Altman, the president of Y Combinator, the tech industry's largest and most well-respected incubator for start-ups. "And that's always going to feel deeply unfair. It feels unfair to me. But to drive society forward, you've got to let that happen." Altman's hunch is a solid one. Bob Lord, an inequality analyst and tax attorney, believes the shift in wealth could happen as early as 25 to 30 years from now. But it probably won't be someone like Gates who makes it to 13 digits first — Gates is far too preoccupied with giving his money away, Lord says. "I think it's going to take someone less like Gates and more like Rockefeller," he tells Tech Insider. Charlie Crowhurst / Stringer / Getty Images John D. Rockefeller, who was lucky enough to fall into the money-making oil industry, largely preferred to sit on his wealth rather than pay it forward. At his richest, the tycoon was worth the equivalent of $350 billion in today's money. The first billionaire could be a total unknown, Lord says, or it could be someone like Elon Musk "who hits four or five home runs rather than one." "Someone is going to create something that no one has conceived of before," he says. And chances are, that something will produce unprecedented levels of wealth for one person at the tippy top. Altman, for his part, believes technological innovation will increase exponentially to the point where the people behind those innovations will make hundreds of billions of dollars a year. He believes the more money that companies like Y Combinator put behind niche industries like driverless vehicles and virtual reality, the more popular they will become and the more likely it is that they can transform society. "The first trillionaire will be an inventor, someone who creates something world-changing, like Bill Gates did with the PC," Oliver Williams, of the London-based consultants Wealth Insight, told The Times of London. Charlie Crowhurst / Stringer / Getty Images According to Credit Suisse's 2013 Global Wealth Report, global wealth has more than doubled since 2000, reaching an all-time high of $241 trillion. The analysis found there could be more than a billion millionaires globally, or roughly 20% of the adult population, within just two generations. "If this scenario unfolds," the authors write, "then billionaires will be commonplace, and there is likely to be a few trillionaires too — eleven according to our best estimate." That's right: There could be as many as 11 trillionaires walking the planet within the next 50 years. "I think we just have to accept that there are going to be people who have wildly more money than others," Altman says. "The tradeoff of that is that I think we should guarantee a pretty good standard of living for everybody, but this socialism ideal that everyone should be totally equal — I don't think that's going to work." If the world is overflowing with money, m ost people will receive a small portion of that wealth, ideally enough to create a stable life should they choose to work or not, Altman believes. And at the other end will be the trillionaires. NOW WATCH: This is how billionaires can buy their survival during an apocalypse

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San Francisco's housing bust is becoming 'legendary'12

Shutterstock The San Francisco housing bubble – locally called “Housing Crisis” – needs a few things to be sustained forever, and that has been the plan, according to industry soothsayers: an endless influx of money from around the world via the startup boom that recycles that money into the local economy; endless and rapid growth of highly-paid jobs; and an endless influx of people to fill those jobs. That’s how the booms in the past have worked. And the subsequent busts have become legendary. The current boom has worked that way too. And what a boom it was. Was – past tense because it’s over. And now jobs and the labor force itself are in decline. Until recently, jobs and the labor force (the employed plus the unemployed who’re deemed by the quirks of statistics to be looking for a job) in San Francisco have been on a mind-bending surge. According to the California Employment Development Department (EDD): The labor force soared 15% in six years, from 482,000 in January 2010 to its peak of 553,700 in March 2016. Employment skyrocketed 23%, from 436,700 in January 2010 to its peak of 536,400 in December 2015. That’s nearly 100,000 additional jobs. This increase in employment put a lot of demand on housing. Low mortgage rates enabled the scheme. Investors from around the world piled into the market. And vacation rentals have taken off. As money was sloshing knee-deep through the streets, and many of the new jobs paid high salaries, the housing market went, to put it mildly, insane. But the employment boom has peaked. Stories abound of startups that are laying off people or shutting down entirely. Some are going bankrupt. Others are redoing their business model to survive a little longer, and they’re not hiring. Old tech in the area has been laying off for months or years, such as HP or Yahoo in Silicon Valley, where many folks who live in San Francisco commute to. So civilian employment in May in SF, at 533,900, was below where it had been in December. The labor force in May, at 549,800, was below where it had been in July 2015. Some people are already leaving! The chart shows how the Civilian Labor Force (black line) and Civilian Employment (red line) soared from January 2010. As employment soared faster than the labor force, the gap between them – a measure of unemployment – narrowed sharply. But now both have run out of juice: Shutterstock During the dotcom bust, the labor force and employment both peaked in December 2000 at 481,700 and 467,100 respectively. Employment bottomed out at 390,900 in May 2004, a decline of over 16%! The workforce continued falling long past the bottom of employment. SF is too expensive for people without jobs to hang on for long. Eventually, they bailed out and went home or joined the Peace Corp or did something else. And this crushed the SF housing market. But by the time the labor force bottomed out in May 2006 at 411,000, down 15% from its peak, the new housing boom was already well underway, powered by the pan-US housing bubble. In SF, this housing bubble peaked in November 2007 and then imploded spectacularly. So now, even if employment in San Francisco doesn’t drop off as sharply as it did during the dotcom bust, in fact, even if employment and the labor force just languish in place, they will take down the insane housing bubble for a simple reason: with impeccable timing, a historic surge in new housing units is coming on the market. According to the SF Planning Department, at the end of Q1, there were 63,444 housing units at various stages in the development pipeline, from “building permit filed” to “under construction.” Practically all of them are apartments or condos. This chart shows that the development boom is not exhibiting any signs of tapering off. Planned units are entering the pipeline at a faster rate than completed units are leaving it; and the total number of units in the pipeline is still growing:Shutterstock Many units will come on the market this year, on top of the thousands of units that have hit the market over the last two years. Once these 63,444 units are completed – if they ever get completed – they’ll increase the city’s existing housing stock of 382,000 units by over 16%. If each unit is occupied by an average of 2.3 people, these new units would amount to housing for 145,000 people. This is in addition to the thousands of units that have recently been completed as a result of the current construction boom, many of which are now on the market, either as rentals or for sale. This surge in new, mostly high-end units has created an epic condo glut that is pressuring the condo market, and rents too, to where mega-landlord Equity Residential issued an earnings warning in June, specifically blaming the pressures on rents in San Francisco (and in Manhattan). Manhattan’s condo glut also has taken on epic proportions. Sales of apartments in the second quarter dropped 10% year-over-year, to the lowest since 2009. And condo prices plummeted 14.5% in 3 months. Ugly!NOW WATCH: An exercise scientist reveals exactly how long you need to work out to get in great shape

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A cocaine-stuffed horse-head statue might be the latest sign of Mexican cartels' expansion

New Zealand Police On Friday, New Zealand made its largest cocaine bust ever, seizing nearly 80 pounds of the drug hidden in a horse's head statue that arrived in the country from Mexico. While three people are in custody in relation to the shipment, it's not yet clear who sent the drugs or what their final destination was. While New Zealand has seen its own drug use rise, it's also likely that the shipment was destined for Australia, where a kilo of cocaine, about 2.2 pounds' worth, can fetch $228,000 to $259,000 — far more than the same amount commands in the US. The arrest of two Mexican nationals in relation to the bust suggests that it may be part of efforts by Mexican drug cartels to expand internationally, moving into new markets and capturing new consumers. If the shipment was orchestrated by a Mexican cartel, then the odds are the Sinaloa cartel of jailed kingpin Joaquín "El Chapo" Guzmán — which controls are large portion of the world's cocaine — was involved. If the Sinaloa cartel was behind the cocaine shipment, it's not the only Mexican criminal organization seeking to expand into Asia and Oceania — nor is it limiting its offerings to cocaine. Push and pull New Zealand Police Active links between Mexican cartels and the Australian drug market were uncovered in 2010, when Mexican nationals, who had links to cartels, were arrested during counter narcotics operations in Australia. According to a report from the Australian National University, cartel expansion in Asia has been driven by "push" factors and "pull" factors. Declining demand and falling prices in US and European markets has pushed traffickers to other markets. New Zealand Police Those traffickers have been pulled toward Asia by Australia's high prices for illicit drugs ($228,000 to $259,000 for a kilo of cocaine, versus $54,000 in the US), as well as increased demand for illegal drugs related to the region's rapid economic growth. The region also has the most amphetamine-type stimulant users in the world, and at the wholesale level, meth can cost 20 times more in Australia than it does in Mexico. Australia isn't the only target, however. In early 2015, police reported "larger than usual amounts" of high-purity cocaine had been intercepted in India, and drug seizures in that country tripled between 2009 and 2013. In June 2015, authorities in Bangladesh seized a $14 million shipment of cocaine, believed to be from Bolivia. Nor are the drugs in question limited to cocaine. China accounts for 50% of the region's annual crystal-meth seizures (though much of the drug is produced in China). In 2013, South Korea seized more than 30 pounds of crystal meth that it linked to Mexico, and that same year, Japanese authorities discovered crystal-meth trafficking from Mexico into their country. New Zealand Police Though the ANU's report notes that the danger posed to Australia is not from any one group, but rather from "dark networks" of "multiple organizations ... where one unit is not merely the formal subordinate in some larger hierarchical arrangement," it does describe the specific threats traffickers — Mexican cartels in particular — present to Australia. Mexican cartels have pursued the wholesale side of the drug market in Australia, leaving retail distribution to local criminal groups (much as they do with street gangs in the US). And not only do Mexican cartels not discriminate when it comes to partnering with criminal groups — they often add incentives to ensure their continued access to the market. Worryingly, these incentives include illegal firearms, many of which flow into the hands of criminal groups in Mexico from sources in the US. Mexican cartels' growing partnerships with Australian criminal groups "is of particular concern because of the potential escalation of violence between local criminal groups vying for control of domestic distribution networks, made all the more lethal due to the diffusion of illegal firearms from the cartels," the ANU's report states. 'They are businessmen ... They are everywhere' While Guzmán's Sinaloa cartel is not the only game in town among Mexican criminal organizations, reports and arrests indicate that the Sinaloa organization has an outsize presence in international drug markets. New Zealand Police The cartel is believed to have operations in up to 50 countries, ranging from Argentina up to the US, across Europe and Africa, and throughout Asia and Oceania. It's suspected of partnering with Chinese traffickers to bring precursor chemicals into Mexico to fuel that country's growing meth industry. It's also turned up in Hong Kong, and the arrest of suspected Sinaloa cartel operative in the Philippines in 2015 led to the revelation that the cartel was attempting to break into that country's meth trade. New Zealand Police In Australia, the Sinaloans appear to have a significant presence. In September 2010, a report indicated that the cartel was moving more than 1,100 pounds of cocaine into Australia each month. In early 2013, court documents detailed how the Sinaloa organization would fly millions of dollars from Australia to the US to purchase cocaine, and then move that cocaine back to Australia. The Sinaloa cartel has "the capacity to negotiate with Nigerian criminal groups, European criminal groups — they provide to everybody. They are businessmen," Antonio Mazzitelli, the UN Office on Drugs and Crime representative for Mexico, told Vice earlier this year. "They are everywhere. They had the capacity to take advantage of the globalization of the demand for illicit drugs. They have the capacity to provide all types of drugs everywhere," Mazzitelli said.NOW WATCH: Federal agents found one of the longest US-Mexico drug tunnels hidden under a dumpster

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ADP private payrolls rise more than forecast

ADP Private payrolls increased by 172,000 in June, according to ADP Research Institute. The median estimate among economists was for an addition of 160,000, according to Bloomberg. The goods-producing sector lost 36,000 jobs, and more than half of them were in manufacturing. The service-providing sector gained 208,000 jobs. Following the slowdown in jobs growth during May to the weakest pace in six years, economists will use Friday's report for June from the Bureau of Labor Statistics to gauge whether there's a real slowdown in hiring. "Since the start of 2016, average monthly job creation has slightly dropped," said Ahu Yildirmaz, vice president and head of the ADP, in the release. "Lackluster global growth, low commodity prices, and an unfavorable exchange rate continue to weigh on U.S. companies, especially larger companies." NOW WATCH: What to do with your hands during a job interview

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Goldman Sachs, JPMorgan, and other top investment banks just pledged to help London keep its finance crown

Evan Vucci / AP/Press Association Images LONDON (Reuters) and (BI) - Major investment banks including Goldman Sachs and JPMorgan said they would work to help London remain a top center for international finance, in a joint statement on Thursday with British finance minister George Osborne. "Britain's decision to leave the EU clearly presents economic challenges which we are determined to work together to meet," the statement said. "Today we met and agreed that we would work together to build on all this with a common aim to help London retain its position as the leading international financial center." Senior executives from Standard Chartered, Bank of America Merrill Lynch, Morgan Stanley, Goldman Sachs and JPMorgan met Osborne and signed the statement. There have been concerns that, following the shock Brexit vote last month, the UK could lose it "passporting" rights for the European Union, which allow banks to operate across the EU using a single UK-based licence. This is not set in stone, however, and the statement points out that the UK has other benefits, such as: "one of the most stable legal systems in the world, a brilliant workforce and deep, liquid capital markets unmatched anywhere else in Europe, all of which are underpinned by world class regulators." The statement from the Chancellor and investment banks is the second joint statement issued by the Treasury and banks this week. Earlier this week representatives of the "Big Four" — Barclays, HSBC, Lloyds, and Royal Bank of Scotland — and a selection of challenger banks and smaller lenders signed a joint statement pledging to lend more despite Brexit. While JPMorgan is one of the banks to sign up to help keep London a financial hub, the US investment bank has repeatedly warned that it may have to move jobs out of the UK. CEO Jamie Dimon told an Italian newspaper this week: "The worst-case scenario is we would have to move some thousands of employees to other branches in the euro zone." Here's the full statement from the Treasury and investment banks: "Britain’s decision to leave the EU clearly presents economic challenges which we are determined to work together to meet. "We will also work together to identify the new opportunities that may now become available so that Britain remains one of the most attractive places in the world to do business. "One of Britain’s key economic strengths is that it is a world leading financial centre. "It has one of the most stable legal systems in the world, a brilliant workforce and deep, liquid capital markets unmatched anywhere else in Europe, all of which are underpinned by world class regulators. "In recent years it has established itself as a global hub for renminbi, rupee, Islamic finance and green finance, as well as leading in new markets such as FinTech. "Today we met and agreed that we would work together to build on all this with a common aim to help London retain its position as the leading international financial centre." (Reporting by Reuters' David Milliken, editing by Andy Bruce)

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Initial jobless claims fall more than expected1

TBI Initial jobless claims fell 16,000 last week to 254,000, according to the Labor Department. Economists had forecast that the number of first timers filing for unemployment insurance rose to 269,000, according to Bloomberg. The previous week's print was revised up by 2,000 to 270,000. This data captures the first week of the annual period when automakers shut down their plants for retooling, and that could distort the numbers. "Once the dust has settled after the retooling shutdowns, we fully expect claims to return to their underlying trend, in the low 270s," wrote Pantheon Macroeconomics' Ian Shepherdson in a note ahead of the release. Weekly initial claims have not risen above 300,000 for 70 straight weeks, the longest stretch since 1973. More to come ...NOW WATCH: These are the best, highest-paying companies in America

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