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Soon after Nancy Pelosi, speaker of America’s House of Representatives, left Taiwan on August 3rd, China launched war games around the island, which it claims as its own. A sabre-rattling response to Ms Pelosi’s intentionally provocative act, these were also a dry run for a bid to reunify Taiwan with the mainland by force, which China does not rule out. Troubling, then, for Taiwan and its Western backers, that in American simulations of the conflict the Chinese side often prevails. One congressional report in 2018 warned that America could plausibly face a “decisive military defeat” against China in a battle over Taiwan. Since then China has continued to chip away at American military superiority, including its technological edge. Pushing that edge is therefore a priority for the Department of Defence (dod). And that would be easier if America’s world-beating software developers worked more closely with its equally formidable armsmakers, thinks Michael Brown, who heads the department’s Defence Innovation Unit. Katherine Boyle of Andreessen Horowitz, a venture-capital (vc) firm, observes that America’s largest weapons manufacturers lack top-flight programmers. Silicon Valley has them in spades—but has also long displayed an aversion to battlefield technology. Now geopolitical strife, from Chinese bellicosity to Russia’s invasion of Ukraine, is suddenly making the defence sector look more moral in techies’ eyes. At the same time, technology is changing how wars are fought. And big tech and scrappy startups alike see the dod’s $140bn annual procurement budget, plus American allies’ smaller but cumulatively significant kitties, as ripe for eating into. Giants from Amazon to Microsoft are pitching for Pentagon contracts. vc funding for American aerospace and defence startups has tripled since 2019, to $10bn (see chart). In the first half of 2022 such firms raised $4bn, down a bit from the last six months of 2021 but not as sharply as for startups overall. On August 8th Palantir, a listed data-analytics firm which works with military and intelligence agencies, reported better-than-expected second-quarter revenues of $473m, up by 26% year on year. The period of estrangement between the crucible of America’s tech and the Pentagon may, in other words, be coming to an end. The renewed bonhomie may reshape America’s mighty military-industrial complex.The dod played a large role in seeding Silicon Valley’s early technologies, from radar to semiconductors. Lockheed once built missiles in Sunnyvale, a city wedged between Mountain View (now home of Google and its parent company, Alphabet) and Cupertino (which is Apple’s). The Vietnam war changed all that. Anti-war sentiment permeated Stanford’s lecture halls and faculty lounges, and the nearby garages of startup founders of the day. Protests against the conflict led the university to ban classified research and military recruitment on its campus in Palo Alto. In 2018 a protest by thousands of Google employees successfully stopped their employer from bidding for a Pentagon cloud-computing contract. The search giant’s guidelines for its artificial-intelligence (ai) projects explicitly rule out weapons-related work. Silicon Valley forgeNow two forces are pulling Palo Alto and the rest of the valley closer to the Pentagon. The first is the mounting geopolitical risk. Even before Russia’s invasion of Ukraine reminded the West that big wars can still occur, a growing sense of insecurity was causing countries to beef up their defence budgets. Globally these exceeded $2trn for the first time in 2021. Citigroup, a bank, reckons that 2% of gdp will go from being a largely ignored target for defence spending among nato members to the alliance’s de facto floor. That would greatly expand the worldwide addressable market for American tech firms dabbling in defence. Christian Brose, strategy chief of Anduril, which makes anti-drone and other defence systems, says his firm will look to America’s allies to fuel growth. Since the start of the Ukraine war several European defence ministries have expressed interest in Palantir’s data analytics.The second force is technology, which is reshaping 21st-century warfare. Computing, and in particular ai, is finding its way into weapons, and the command-and-control systems that connect them to one another. The Pentagon is therefore looking beyond its usual contractors to places like Silicon Valley, whose machine-learning chops put the “primes”, as defence giants such as Raytheon or Lockheed Martin are known in the business, to shame. That is a big reason why Ash Carter, defence secretary under Barack Obama, created the Defence Innovation Unit in 2015. “Less of the tech the Pentagon needs is developed inside and more of it is becoming commercial and dual-use,” explains Mr Brown.Rather than buy isolated “platforms”—aircraft, tanks and other advanced systems—the dod would also like to build more networks of cheaper battle units. Last year Israel demonstrated how this might work by deploying swarms of connected drones in Gaza. The Pentagon hopes to do something similar through its Joint All-Domain Command and Control (jadc2) system, which enables data-sharing among sensors and battle units in real time. This has led to a shift in how the Pentagon views technology, says Raj Shah, director of Shield Capital, a military-focused vc firm. The future of warfighting is “software first”, reckons Seth Robinson of Palantir.This is good news for software pedlars. Big tech already equips the armed forces and law enforcement with things like cloud storage, databases, app support, admin tools and logistics. Now it is moving closer to the battlefield. Alphabet, Amazon, Microsoft and Oracle are expected to divvy up the $9bn five-year contract to operate the Pentagon’s Joint Warfighting Cloud Capability (jwcc). Last year Microsoft was awarded a $22bn us Army contract to supply its HoloLens augmented-reality headset to simulate battles for training for up to ten years. The software titan is also helping develop the air force’s battle-management system, which aims to integrate data sources from different parts of the battlefield. In June Alphabet launched a new unit, Google Public Sector, which will compete for the dod’s battle-networks contracts. In a departure from the company’s earlier Pentagon-shy stance, Google’s cloud chief, Thomas Kurian, has insisted that “We wouldn’t be working on a programme like jwcc purely to do back-office work.” Smaller firms, too, spy an opportunity. In January Anduril secured a contract to build anti-drone defences worth $1bn over ten years. The following month another startup, Skydio, won one to sell the us Army $100m-worth of drones. Palantir is one of several tech firms with contracts to flesh out the jadc2 vision. In July c3.ai, a software firm that went public in 2020, was picked by Raytheon, the biggest prime, to develop ai for a long-range precision-targeting system. Steve Walker, chief technology officer of Lockheed Martin, Raytheon’s main rival, says that his company is also looking to work with such firms. Tech’s conquest of warfighting is far from assured. The tech giants’ earlier sorties into defence have a mixed record. Little appears to have come out of a big dod programme from 2015, joined by Apple, to develop battle-ready wearables. The jwcc project was revived after an earlier version, called jedi, was cancelled amid lawsuits from Amazon, which had lost the contract to Microsoft. Microsoft’s HoloLens award has been plagued by delays and criticised as wasteful. Despite robust revenue growth, Palantir reported another loss last quarter, disappointing investors who were expecting the 18-year-old firm to make money at last. Its share price tumbled by more than 10%.Among the upstarts, Anduril and Skydio remain exceptions among smaller firms in winning big contracts. Most startups, says Ms Boyle, are “waiting to see if they are going to get a major contract”. A fraction of the $1trn that America has spent on defence procurement since 2016 has gone to non-conventional defence contractors. As that share rises, the primes, which retain a lot of power (and armies of lobbyists) in Washington, may become less welcoming of the newcomers. Such obstacles may yet be overcome—not least because it appears to be in the interests not just of the tech disrupters but also of the Pentagon. At the end of 2020 America at last defeated China in one of the Pentagon’s war games. The winning move was not more and better hardware. It was the roll-out of clever software-enabled systems like jadc2. ■For more analysis of the biggest stories in business and technology, sign up to The Bottom Line, our weekly newsletter. More

Consumer confidence in the housing market dropped to the lowest level since 2011, as both prospective buyers and sellers have become more pessimistic.
Just 17% of those surveyed in July said now is a good time to buy a home, down from 20% in June, according to a monthly survey by Fannie Mae.
Even more telling, however, is that the share of sellers who think it’s a good time to list their homes dropped to 67% in July from 76% two months prior.

A sign stands outside an upscale home for sale in the Lake Pointe Subdivision of Austin, Texas.
Ed Lallo | Bloomberg | Getty Images

Consumer confidence in the housing market dropped to the lowest level since 2011, as both prospective buyers and sellers have become more pessimistic, according to a monthly survey released Monday by Fannie Mae.
Just 17% of those surveyed in July said now is a good time to buy a home, down from 20% in June. Even more telling, however, is that the share of sellers who think it’s a good time to list their homes dropped to 67% in July from 76% two months prior.

Far fewer consumers now think home prices will rise, while the share of those who think prices will fall jumped from 27% to 30%.
Fannie Mae’s Home Purchase Sentiment Index consists of six components: buying conditions, selling conditions, home price outlook, mortgage rate outlook, job loss concern and change in household income. Overall, the index fell two points in July to 62.8. It’s down 13 points from a year earlier. It hit an all-time high of 93.7 in summer 2019, before the pandemic.
“Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it’s a bad time to buy, as well as sell, a home,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, wrote in a release.

The average rate on the 30-year fixed mortgage started this year around 3% and then began rising steadily, briefly crossing the 6% line in June, according to Mortgage News Daily. It fell back slightly since then but is still in the mid-5% range.
Just 6% of those surveyed think mortgage rates will fall, while 67% said they expect rates to rise further.

Sales of both new and existing homes have been falling sharply over the last few months, as affordability weakens and consumers worry about inflation and the broader economy.
Big losses in the stock market have also caused demand for higher-end homes to drop. More supply is coming on the market, which is helping a little bit, but inventory is still well below historical norms, especially at the entry level.
“With home price growth slowing, and projected to slow further, we believe consumer reaction to current housing conditions is likely to be increasingly mixed: Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision believing that home prices may drop,” added Duncan.

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News site Axios is being acquired by Cox Enterprises, which owns several newspapers.
The deal values Axios at $525 million, sources said.
Axios’ founders will continue to oversee day-to-day operations, the companies said.

Jim VandeHei, Co-Founder and CEO of Axios speaks at the 2022 Milken Institute Global Conference in Beverly Hills, California, May 3, 2022.
Mike Blake | Reuters

Axios is being acquired by Cox Enterprises, the companies said Monday, with plans to expand the digital news site’s coverage to include more cities.
The deal values Axios at $525 million, according to people familiar with the matter, who asked not to be named because financial terms of the deal weren’t disclosed. Axios co-founders Jim VandeHei, Mike Allen and Roy Schwartz will remain on the company’s board and continue to manage its day-to-day operations, the companies said in a release. Alex Taylor, the CEO and chair of Cox Enterprises, will join the Axios board.

Cox, which is privately held in and based in Atlanta, had previously invested in Axios in fall 2021. The company ramped up talks to buy Axios several months ago, intrigued by the company’s push into local journalism, VandeHei said in an interview. Axios, which focuses heavily on politics and business news, launched in 2017 and offers local coverage of cities that include Austin, Texas, Boston and Seattle, according to its website.
“We were looking for two things: a buyer that was authentically committed for the very long term to serious media, and someone who was fine with us being in control for a long time,” VandeHei said. “That’s not because we’re arrogant but because we have a clear mind about what a good journalism business looks like.”
Axios never hired a banker and only spoke with Cox about a sale, rather than soliciting other buyers, said VandeHei, who described the deal as “nice and easy,” with talks escalating over the past few months. Axios had previously held talks to sell to Axel Springer and to merge with The Athletic, which The New York Times bought earlier this year.
This is the second time VandeHei has founded a media company that sold for more than $500 million. He co-founded Politico, which sold for $1 billion to Axel Springer last year after he had departed for Axios. Allen was Politico’s first hire and Schwartz was Politico’s former chief revenue officer.
Cox owns cable and automotive businesses. It also owns The Atlanta Journal Constitution, the Dayton Daily News and other Ohio newspapers, which the company said will continue to operate independently. It sold control over the vast majority of its media assets in 2019 to private equity firm Apollo Global Management.

VandeHei, Allen and Schwartz weren’t look to sell, but they did need more money to expand the company into more local markets. While some current investors weren’t interested in adding more capital, Cox felt confident in the leadership’s ability to monetize local journalism at scale with a lean digital-first approach, said Cox Enterprises Chief Financial Officer Dallas Clement in an interview.
Axios has been profitable for the last three years but is expected to lose money in 2022, according to a person familiar with the matter.
“You don’t always know when an acquisition opportunity will present itself, but here it did,” Clement said.
Axios HQ, the company’s software component, will become a separate entity led by Schwartz, president of Axios.
“We are excited about entering into this new chapter with Cox and the opportunities we can explore with Axios HQ as a separate business,” Schwartz said.
Disclosure: CNBC parent company NBCUniversal invested in Axios.
WATCH: Axios CEO on the stakes of the George senate runoff

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Investing in supertrends

Baidu announced Monday it became the first robotaxi operator in China to obtain permits for selling rides with no human driver or staff member inside the vehicles.
The initial scale of the permits is small: 10 robotaxis divided between two suburban areas of Wuhan and Chongqing, two major Chinese cities.
In the U.S., Alphabet’s Waymo and GM’s subsidiary Cruise can already run public robotaxis with no human staff in the vehicles.

Chinese tech company Baidu announced Monday it can sell some robotaxi rides without any human staff in the vehicles.

BEIJING — Chinese tech company Baidu said Monday it has become the first robotaxi operator in China to obtain permits for selling rides with no human driver or staff member inside the vehicles.
The local government approvals allow Baidu’s Apollo Go robotaxi business to eliminate the cost of human personnel in some instances.

The initial scale of the permits is small: 10 robotaxis divided between two suburban areas of Wuhan and Chongqing, two major Chinese cities.
In April, Baidu and rival robotaxi operator Pony.ai received approval from a Beijing suburban district to operate robotaxis without a human driver. But the Chinese capital still requires human staff to sit in the robotaxi with passengers.
Municipal authorities across China have issued an increasing number of permits in the last year that allow robotaxi companies to operate and charge fares in selected areas.
In the U.S., Alphabet’s Waymo and General Motors’ subsidiary Cruise can already run public robotaxis with no human staff in the vehicles. Laws for testing robotaxis and charging riders vary by city and state.
Baidu claimed it has received more than one million orders for robotaxi rides. In the first three months of the year, the company said it operated 196,000 rides. Baidu is set to release second quarter results on Aug. 30. More

Hong Kong is reducing the amount of time travelers will need to serve hotel quarantine, from seven days down to three starting Friday.
After the quarantine, travelers will be under “home medical surveillance” for four days.
“We have to strike a balance between risk level as well as our economic activity,” Chief Executive John Lee said.

Hong Kong is reducing the amount of time travelers will need to serve hotel quarantine, from seven days down to three starting Friday.
“The seven-day quarantine hotel arrangement will be changed to three days in a quarantine hotel, plus four days of home medical surveillance,” Chief Executive John Lee said at a press conference Monday.

After completing the hotel quarantine, travelers can stay at home or in a hotel for the four days of surveillance. During this period people will be able to leave their place of residence, but cannot enter “places where there is active checking of vaccine passes,” Lee said in Cantonese.
That includes bars, pubs, gyms and beauty parlors. People are also not allowed to visit nursing homes, schools and specified medical premises during the surveillance period.
“They cannot participate in any activities where masks are to be taken off,” Lee added. If they test negative on a rapid antigen test, they can take public transportation, go to work and enter shopping malls, he said.

“We have to strike a balance between risk level as well as our economic activity. Where risks could be controlled, we want to preserve maximum movement of people and to maintain Hong Kong’s competitiveness,” Lee said.
Hong Kong imposed strict border controls to stem the spread of Covid. But thousands left the Chinese city as restrictive measures weighed on residents while most of the rest of the world opened up.

Secretary for Health Lo Chung-mau said, based on trends of imported cases, 80% of infections are picked up within three days.
“An additional four nights in a quarantine hotel — that means seven nights in a quarantine hotel — is not cost effective and it will also affect Hong Kong’s connection with the world,” he said at the same press conference.
Shares of airline Cathay Pacific in Hong Kong jumped 2.36% following the announcement.

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SMALL BUSINESS PLAYBOOK 2022
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WhatsApp Business launched in 2018 with free, simple tools to help small businesses keep in touch with customers.
Now Mark Zuckerberg is betting it will be the next big driver of monetization for Meta.
Following Facebook and Instagram, “WhatsApp is really going to be the next chapter, with business messaging and commerce being a big thing there,” he recently told CNBC.

Facebook’s new rebrand logo Meta is seen on smartpone in front of displayed logo of Facebook, Messenger, Intagram, Whatsapp and Oculus in this illustration picture taken October 28, 2021.
Dado Ruvic | Reuters

WhatsApp is already widely popular with U.S. consumers. Now Meta Platforms is turning more attention to building its small business base.
The Facebook parent company launched WhatsApp Business in 2018 with free, simple tools to help small businesses keep in touch with customers, offering a way for them to directly interact, search for products and indicate purchasing interest. 

Soon the company will roll out a premium service to small businesses, and it’s doubling down on a newer advertising format called “click-to-message,” which allows consumers to click on a company’s ad within Facebook or Instagram and directly start a conversation with that business on Messenger, Instagram or WhatsApp.
These initiatives offer Meta the ability to boost advertising revenue, stay relevant with small businesses and gain incremental revenue from the premium services offered, analysts said.
Keeping more inside the Meta universe
Meta (then Facebook) bought WhatsApp in October 2014 for around $22 billion. Since then, industry watchers have been watching closely for signs the company plans to monetize the platform more. That time could now be coming.
“If I stay on any of the Meta properties and I’m communicating using Meta, asking questions, and buying — all within the platform — there is no signal loss, and it’s easier for Meta to tell the brand its return-on-advertising spend,” said Mark Kelley, managing director and senior equity research analyst at Stifel. “Signal loss is really what’s been impacting social media companies this year.”
WhatsApp will be the “next chapter” in the company’s history, Meta CEO Mark Zuckerberg recently told CNBC’s Jim Cramer. He noted that the company’s “playbook over time” has been to build services to serve a wide audience and “scale the monetization” after reaching that goal. “And we’ve done that with Facebook and Instagram. WhatsApp is really going to be the next chapter, with business messaging and commerce being a big thing there,” he said.

This messaging from Meta comes at a time of transition for the company and uncertainty among investors. The company recently reported an earnings and revenue miss and forecast a second straight quarter of declining sales. Meta Platforms shares have lost roughly half their value this year. Mark Zuckerberg is betting large sums of money, currently at a loss, on a future in which the metaverse will be a growth driver for the company. But with his bet on the metaverse as far as a decade out before coming to fruition, the Meta CEO has stressed that in the short-term it is WhatsApp that is among the initiatives to focus on for growth.

WhatsApp Business has two components. There’s the WhatsApp Business app for small businesses. There’s also the WhatsApp Business platform, an API, for larger businesses like banks, airlines or e-commerce companies. The first 1,000 conversations on the platform each month are free. After that, businesses are charged per conversation, which includes all messages delivered in a 24-hour session, based on regional rates.
With the free app, small businesses can communicate directly with customers. They can set up automated messages to respond to customers, after business hours, for instance, with information about the business, such as a menu or their company’s location. Businesses can use it to send product pictures and descriptions to customers as well as other information they might be interested in. At present, there’s no ability to pay through WhatsApp, but it’s a feature Meta is considering, a company spokesman said.
Premium features for small businesses — to be rolled out in the coming months — will include the ability to manage chats across up to 10 devices as well as new customizable WhatsApp click-to-chat links to help businesses attract customers across their online presence, the company said in its blog. 
“We think messaging in general is the future of how people are going to want to communicate with businesses and vice versa. It’s the fastest and easiest way to get things done,” the spokesman said.
Why Main Street business is a focus for the WhatsApp push
Analysts see the broad potential. “Messaging is an international forum that everybody uses on an ongoing basis. It’s massive and it’s growing,” said Brian Fitzgerald, managing director and senior equity research analyst at Wells Fargo Securities.
There’s considerable room for growth in the U.S., where WhatsApp is still a “a largely untapped resource by small businesses,” said Rob Retzlaff, executive director of The Connected Commerce Council, a non-profit organization that promotes small businesses’ access to digital technologies and tools.
That’s something Meta sees changing over time. “We are deep believers that that behavior will continue to grow all over the world,” said Sheryl Sandberg, the company’s chief operating officer, on its second-quarter earnings call on July 27. The company estimates that 1 billion users are messaging with a business each week across WhatsApp, Messenger and Instagram. 
The need for free and low-cost digital tools for small businesses is underscored by a 2021 report from The Connected Commerce Council. The report noted that about 11 million small businesses would have closed all or part of their business if not for digital tools that allowed them to continue to operate. 
One driver for Meta in promoting WhatsApp Business is advertising revenue. “Click- to-message is already a multi-billion dollar business for us and we continue to see strong double-digit year-over-year growth,” Sandberg said on the second quarter earnings call. Click-to-message “is one of our fastest growing ad formats for us,” she added. The company does not break out how much of the business comes from WhatsApp versus Messenger or Instagram.
Businesses like this format because it’s “an inexpensive way to interact [with consumers] that feels a little more personal,” said Stifel’s Kelley. What’s more, it also alleviates a problem caused by the privacy change Apple made to its iOS operating system last year. 
Say, for instance, a customer views a Facebook ad for a sneaker retailer and connects directly with the business through WhatsApp. “In a world where we’re trying to do more and more with less and less data, there’s no leakage here. Everything’s protected,” Fitzgerald said. “Nobody [else] in the world knows I bought these sneakers and there’s a direct business-to-consumer connection.” 
Moreover, by offering premium services, Meta could boost revenue, at least incrementally, Kelley said.
José Montoya Gamboa, owner of Malhaya in Mexico, who has been using the free business app for several years, said he plans to pay for the premium version when it becomes available because he likes the ability to use it on multiple devices.
But Geraldine Colocia, community manager at Someone Somewhere, a certified B Corporation that collaborates with hundreds of artisans around Mexico, isn’t sure. She’s been using the free version of the app for more than two years, and would consider paying for it, but the decision will turn on the actual features and the pricing, she said. More

As climate change threatens the U.S. with more natural disasters, it’s becoming increasingly costly for Americans to insure their homes, experts say.
Homeowners insurance premiums rose by 12.1% nationwide, compared to one year ago, but surges have been higher in disaster-prone states, according to Policygenius.

Firefighters pull up to a burning house during the Kincade fire in Healdsburg, California, on Oct. 27, 2019.
Josh Edelson | Afp | Getty Images

As climate change threatens the U.S. with more natural disasters, it’s becoming increasingly costly for Americans to insure their homes ⁠— and it’s only expected to get worse, according to experts.
“These things are occurring more often, and they’re causing more damage,” said Jeremy Porter, chief research officer at First Street Foundation, a non-profit focused on defining U.S. climate risk.

Indeed, there were 20 separate billion-dollar U.S. natural disasters in 2021 — including a deep freeze, wildfires, flooding, tornado outbreaks and other severe weather — costing a total of $145 billion, according to the National Oceanic and Atmospheric Administration. 
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The uptick in costly climate events, combined with rising costs to rebuild, labor shortages and “demand surges” after natural disasters have triggered higher homeowners insurance premiums, experts say.
“We’re seeing drastic increases,” said Pat Howard, managing editor and licensed home insurance expert at Policygenius.
Some 90% of U.S. homeowners saw premiums jump from May 2021 to May 2022, costing an average of $134 more per year, according to a Policygenius report.

The average increase is 12.1% nationwide, compared to one year ago, but surges have been higher in disaster-prone states like Arkansas, Washington and Colorado, the report found.

Some homeowners have hidden flood risks

Water-damaged items sit outside a house in Squabble Creek, Kentucky, on July 31, 2022, after historic flooding in Eastern Kentucky.
Seth Herald | Afp | Getty Images

Brad Wright, a certified financial planner and managing partner of Launch Financial Planning in Andover, Massachusetts, said erosion and rising sea levels are growing concerns for clients interested in coastal properties.
When someone considers buying a home along the beaches of southern Maine, for example, there are always questions about flood risks and the cost of insuring the property. Depending on the answers, they may choose another home.
Still, owners may unknowingly purchase or own in flood-prone areas. While the Federal Emergency Management Agency identified 8 million properties at risk for 1-in-100-year flooding, First Street Foundation found nearly double the amount in a 2020 report. 

These family houses have been around forever, and they may not have a mortgage, so flood insurance may not be required.

Brad Wright
Managing partner of Launch Financial Planning

Standard homeowners insurance policies don’t cover flooding, but protection is available through FEMA or private coverage, which may be required by mortgage lenders. While the average yearly premium is $985, according to ValuePenguin, experts say the cost may be significantly greater in high-risk areas.
Last October, FEMA revamped its program to more accurately assess flood risk, causing insurance premiums for some coastal properties to rise to $4,000 or $5,000 annually, up from just $700 or $800, Porter from First Street Foundation said.  
These hikes may be prohibitively expensive for lower-income families or retirees, especially those who may be living in a property inherited from family, Wright said. 
“These family houses have been around forever, and they may not have a mortgage, so flood insurance may not be required,” he said. “But they should have it anyway.”

Wildfire risk may be costly to insure

Flames burn during the McKinney Fire in the Klamath National Forest on July 31, 2022.
David Mcnew | AFP | Getty Images

Although wildfires are covered as part of the standard homeowners insurance coverage, policy premiums in fire-prone areas have also become more costly, according to Michael Barry, chief communications officer at the Insurance Information Institute.
“The home insurer is looking to price the policy to reflect the risk,” he said.
For example, premiums rose by nearly 10% in California from May 2021 to May 2022, according to Policygenius, with the increase in costly wildfires partially to blame.

If you move into an area that’s prone to wildfires or flooding, that cost goes up dramatically because the carrier is passing that on to the consumer.

Bill Parrott
President and CEO of Parrott Wealth Management

Bill Parrott, an Austin, Texas-based CFP, president and CEO of Parrott Wealth Management, has also seen rising premiums in high-risk regions.
“If you move into an area that’s prone to wildfires or flooding, that cost goes up dramatically because the carrier is passing that on to the consumer,” he said. “That’s a big expense for a lot of people.”
Nationwide, at least 10 million properties may have “major” and “extreme” wildfire risk, according to First Street Foundation.

How to reduce premiums in high-risk areas

Regardless of where you live, it’s critical to do your homework before purchasing a property, suggests Barry of the Insurance Information Institute.
Before making an offer, you can use free tools like ClimateCheck or Risk Factor to measure long-term climate risk for a specific property. 

Current homeowners may ask their insurance provider about discounts for taking steps to mitigate possible damage from climate events, such as storm-proofing your home, said Howard from PolicyGenius.
You may also save money by shopping around and bundling home and auto policies. Homeowners insurance is no longer a “set-it-and-forget-it” type of thing, he said. 
And if you have sufficient emergency savings, you may consider lowering your premiums by increasing your deductible, Howard said.

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Some restaurant chains are reporting weaker sales or traffic.
McDonald’s and Chipotle said low-income customers are spending less, while higher-income consumers are visiting more frequently.
Starbucks, Bloomin’ Brands and Restaurant Brands International said they aren’t seeing big changes in consumer spending.

Howard Schultz
David Ryder | Reuters

Some restaurants are reporting weaker sales or declining traffic in the second quarter, signaling that diners are cutting back on eating out to save money.
But CEOs are split on how consumer behavior is changing and whether it’s impacting their companies.

McDonald’s Chris Kempczinski and Chipotle Mexican Grill’s Brian Niccol are among those who told investors that low-income consumers are spending less money at their locations, while higher-income customers are visiting more frequently. Other chief executives, like Starbucks’ Howard Schultz and Bloomin’ Brands’ David Deno, said they haven’t seen their customers pull back.
The mixed observations come as restaurant companies hike menu prices to pass along higher costs for ingredients and labor. Prices for food eaten away from home have risen 7.7% in the 12 months ended in June, according to the Bureau of Labor Statistics. People are also paying much more for necessities like gas, toilet paper and groceries, stoking worries about the possibility of a recession.
Historically, pricier fast-casual and sit-own restaurant chains typically see sales deteriorate during slowdowns as people opt to stay home or pack their own lunches. Fast food tends to be the top-performing restaurant sector as people trade down to cheaper meals when looking to treat themselves.
More clues about how dining habits might be changing are in store next week, when salad chain Sweetgreen, Applebee’s owner Dine Brands and Dutch Bros Coffee report earnings.
Here’s what restaurant companies have said so far.

Hunting for deals

Restaurant Brands International, which owns Burger King, Tim Hortons and Popeyes, said it hasn’t seen significant changes in consumer behavior yet. But CEO Jose Cil said there’s been a modest uptick in diners redeeming paper coupons and loyalty program rewards.
“It suggests people are looking for good value for money,” Cil told CNBC.
Yum Brands this week reported lower same-store sales in the U.S. for its KFC and Pizza Hut chains in its second quarter, though the figure rose at Taco Bell. CEO David Gibbs told investors that the global consumer appears to be more cautious and that the low-income U.S. consumer has pulled back spending even more.
But Gibbs also warned that it is hard to generalize about the state of the consumer. He noted the multiple factors affecting behavior, including inflation, the absence of last year’s stimulus checks, people working from home and people going out again after the pandemic.
“This is truly one of the most complex environments we’ve ever seen in our industry,” he said.
Chuy’s Tex-Mex, which has locations in 17 states, said it’s seeing a broad-based consumer slowdown that can’t be split by income levels. The casual-dining chain also blamed record-high temperatures in Texas, which discouraged diners from sitting outside, where they tend to drink more alcohol.

Still spending

Starbucks’ Schultz reported that the company hasn’t seen coffee drinkers cut back their spending. He chalked it up to the chain’s pricing power and strong customer loyalty. Starbucks reported 1% transaction growth in North America for its fiscal third quarter.
Some restaurant companies have focused on keeping prices relatively low to draw in consumers and gain market share over the competition. For example, Outback Steakhouse owner Bloomin’ Brands said it decided not to raise its prices to offset inflation entirely. Instead, its menu prices were up just 5.8% in the second quarter.
As a result, the company said it hasn’t seen diners pull back on spending.
“We don’t see consumers managing their checks at this point,” Bloomin’s Deno said on Tuesday. “In fact, in some of our brands, we’re seeing continued trade up.”
To mitigate inflation, Bloomin’ has been pulling back from discounts and limited-time promotions and focusing on cutting costs elsewhere. Outback’s traffic fell compared with 2019 levels.
Texas Roadhouse said its customers traded up to larger steaks during its second quarter. CFO Tony Robinson said that alcohol sales have weakened slightly but there haven’t been any noticeable shifts in food ordering.

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