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Stocks: 'September slump' strikes again

Written By limadu on Rabu, 01 Oktober 2014 | 14.44

september stock slump

NEW YORK (CNNMoney)

The "September stock slump" came back with a vengeance in 2014. The S&P 500 finished the month down over 1.5%, its worst performance since January. The Nasdaq -- the main gauge of tech and biotech stocks -- lost 1.9%. Even the Dow, the index that tracks America's large and well established companies, ended slightly in the red, down 0.3%.

How did things unravel?

It's a valid question to ask. There was so much excitement in September, what with Alibaba (BABA, Tech30) becoming the largest initial public offering in history, and the S&P 500 and Dow actually setting records. Then things turned sour.

Starting on Monday, September 22, investors hit the pause button and kept hitting it for much of the rest of the month. There were concerns again about how fast the Federal Reserve would raise interest rates. Would it move before next summer when most people expect it to take action? Fed chair Janet Yellen tried to soothe the markets, but the second guessing is back.

Related: Thank Janet Yellen or not?

Traders were also alarmed by a so-called "death cross" among small and mid-cap stocks that make up the Russell 2000 index. That's a technical term for when the 50-day moving average for an index falls below the 200-day average. In other words, the trend is down.

There's a clear polarization emerging again in the market where larger, more established companies are going strong and smaller, riskier ones are faltering. It was an excellent month for companies such as Nike (NKE) (up 13.5%), DuPont (DD) (up 8.6%) and Clorox (CLX) (up 8.4%).

So was September just a blip in an otherwise upward trend or is this a turning point? It depends on your perspective.

The pessimist's case: The bears of the investment world see stocks that are expensive and a market overdue for a correction. This is already the fourth longest bull market since 1928, according to Bespoke Investment Group, and we haven't had a true correction where the market dips 10% or more since 2011.

"We've had one record after another on the Dow and the S&P and yet the underlying economic and geopolitical fundamentals are still worrisome," well known investor Mohamed El-Erian told CNN last week.

Layer on top of that concerns about the Federal Reserve raising interest rates, a flat-lining European economy and ongoing strife in many parts of the world from Ukraine to the places ISIS is terrorizing in the Middle East. Furthermore, there's a case to be made that many companies have been boosting their bottom lines by cost cuts, not genuine growth and innovation for the future.

Related: Is it time for Wall Street to issue a correction?

The optimist's case: Most investment strategists that CNNMoney hears from are sticking with U.S. stocks. They believe the slow, but steady growth will continue. Consider this: despite the lackluster September, the S&P 500 is still up 6.7% for the year.

Optimists see an economy that is getting gradually better with manufacturing and employment picking up, among other positive signs. For example, FedEx (FDX) was one of the best performing stocks in September. The company is often seen as a beacon of corporate health.

They also see companies with a lot of cash. Even if there are headwinds, they're a lot easier to deal with when you have a rainy day fund. Corporate cash and short-term investments (some companies temporarily invest their cash to get a little extra bang for their buck) are near all-time highs, according to FactSet.

"We don't go into bear markets because stocks are too expensive. Typically, it's because of a policy error by the Fed or government," reminds Robert Landry, a fund manager for USAA.

The market always has bumps in the road, even during a bull run.

First Published: September 30, 2014: 5:22 PM ET


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House Dems want NY Fed hearings, too

ny fed reserve bank A frustrated ex-Fed investigator provided several news outlets with apparent secretly-made recordings from her time as a Wall Street regulator.

NEW YORK (CNNMoney)

The three members — Reps. Maxine Waters of California, Al Green of Texas and Keith Ellison of Minnesota — signed a letter Tuesday urging hearings on the Federal Reserve Bank of New York and whether it's too close with the banks it supervises.

They were responding to a collaborative This American Life and ProPublica story centered around the experiences of a frustrated ex-Fed investigator who said her bosses refused to get tough with investment bank Goldman Sachs (GS). The news outlets posted audio she apparently secretly recorded when meeting with her supervisors.

Sen. Elizabeth Warren of Massachusetts called for such hearings late last week. None have yet been scheduled.

The Republicans addressed in the letter -- Reps. Jeb Hensarling of Texas and Patrick McHenry of North Carolina -- are senior members of the House Financial Services Committee. Hensarling, as the committee's chairman, has the authority to call hearings. Representatives for neither congressman immediately responded to requests for comment.

"The article ... suggests that additional scrutiny is needed to ensure that management practices and workplace culture at the FRBNY do not serve to undermine the effectiveness and integrity of the FRBNY's supervision of the financial institutions under its purview," the Democratic congressmen wrote in a statement.

Related: Dodd-Frank financial reform bill only halfway done

Their appeal mentioned Hensarling and McHenry's criticism of the Consumer Financial Protection Bureau, another financial regulatory body, over data privacy issues.

"We hope that you will honor this hearing request given the extensive resources and attention this Committee has dedicated to reviewing the management culture at the [CFPB]," they wrote.

First Published: September 30, 2014: 7:41 PM ET


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This app is helping Hong Kong protesters organize without a cell network

HONG KONG (CNNMoney)

Pro-democracy protesters in Hong Kong -- who need functioning phones to organize -- appear to have found a solution to this problem.

More than 100,000 people in Hong Kong downloaded an app called FireChat in a recent 24-hour period. The app allows protesters to keep chatting, even when their phones lose mobile network connectivity.

FireChat works by connecting users in a daisy chain, or mesh network, via Wi-Fi and Bluetooth. No mobile network is required, and users can choose to remain anonymous.

"With FireChat, it's completely decentralized," said Micha Benoliel, CEO of Open Garden, the app's developer. "And that means you can get connectivity from the people and devices around you -- directly."

Related: Hong Kong protesters willing to pay economic price

protest phone

The benefits of FireChat have caught the attention of demonstration organizers, many of whom are encouraging protesters to download the app.

"Before you go near the government headquarters, please go to the App Store and download FireChat," Joshua Wong, the 17-year-old leader of a student protest group, urged supporters on Facebook. "Use this app to broadcast our situation to the outside world."

Photo essay: Police use tear gas as 'Occupy' comes to Hong Kong

Benoliel, who was in Hong Kong as protests escalated over the weekend, said the protesters were well prepared and well organized, and had anticipated that large crowds would complicate communication.

"They knew that at some point the cellular networks would be shut down or would just be overloaded by a number of people gathering in the same place, so they know that Firechat is a way to remain connected and communicate," Benoliel said.

While Benoliel said that FireChat was not designed specifically with protest movements in mind, it does seem to be catching on at demonstrations. In Taiwan, "Sunflower Movement" protesters also used the app earlier this year as they protested closer ties with Beijing.

First Published: September 30, 2014: 11:05 PM ET


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'Crouching Tiger' sequel to hit Netflix and theaters simultaneously

Written By limadu on Selasa, 30 September 2014 | 14.44

crouching tiger

NEW YORK (CNNMoney)

On that date, Netflix will premiere a feature film -- the sequel to the 2000 hit "Crouching Tiger, Hidden Dragon" -- at the same time moviegoers can see it in theaters.

The dual release will be the realization of Netflix's long-held goal to let subscribers see films at the same time they're in movie theaters.

Netflix (NFLX, Tech30) has achieved its goal by working directly with the Weinstein Company, the independent studio chaired by Bob and Harvey Weinstein. The studio is producing "Crouching Tiger, Hidden Dragon: The Green Legend" for both Netflix and the IMAX chain of super-sized theaters.

"The film is to be the first of several major films backed by Netflix to premiere on the same day on the world's leading Internet TV network and in select IMAX theaters globally, giving consumers and exhibitors around the world unparalleled flexibility in how, when and where they enjoy a major motion picture," the companies said in a statement.

Related: New owner for Shrek and DreamWorks Animation?

Netflix did not identify the other films, and financial terms of the deal were not disclosed. For now, none of the major Hollywood studios -- like Warner Bros., which like this website is owned by Time Warner, or 20th Century Fox -- appear willing to try a simultaneous streaming and in-theater release.

Such a release would risk the ire of box office partners including AMC and Regal Entertainment that rely on ticket sales.

Executives at Netflix have long been interested in offering films concurrently with their theatrical release. They have portrayed the reigning model -- theaters first, then DVDs, then streaming -- as outdated.

"By the time we could watch a movie in the subscription window, it's a year after it's been in the theater," Netflix chief content officer Ted Sarandos said in an interview with CNN earlier this year.

That timing, of course, limits the value of a monthly Netflix subscription.

Defenders of what's known as "windowing" say it maximizes opportunities to recoup financiers' investments in expensive films.

In the interview, Sarandos criticized it as an "antiquated distribution model" and said Netflix was looking at a new model. He compared the idea to the all at once, on-demand release of the drama "House of Cards."

"Maybe in the movie space, we'll do the same thing," he said, "and try to figure out: is there a way that we can, you know, get the movies out there at the same time they're in the theaters? And we'll probably have to make a bet on the programming ourselves to make that work."

Future of media - a custom Flipboard magazine

Indeed, that's what Netflix is doing with "The Green Legend," and it's sure to garner lots of publicity for it.

Sarandos told The New York Times that he hoped the partnership with the Weinsteins and Imax would convince others in Hollywood to strike similar deals.

"What I am hoping is that it will be a proof point that the sky doesn't fall," Sarandos said. "These are two different experiences, like going to a football game and watching a football game on TV."

Earlier this year, in a release that foreshadowed Monday's announcement, Netflix streamed a documentary called "The Square" at the same time it was released in a small number of theaters. But that theatrical release took place primarily so that "The Square" could qualify for Academy Awards consideration.

"The Green Legend" is a different arrangement altogether, with higher stakes for the movie industry. The first "Crouching Tiger, Hidden Dragon" earned more than $210 million worldwide.

"The moviegoing experience is evolving quickly and profoundly, and Netflix is unquestionably at the forefront of that movement," Harvey Weinstein said in a statement Monday night.

First Published: September 29, 2014: 11:07 PM ET


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Bank to pay everyone at least a 'living wage'

living wage First Green Bank's "living wage" policy will raise payroll costs, but CEO Kenneth LaRoe said he expects it will make the bank money over time.

NEW YORK (CNNMoney)

It also will apply to workers' pay.

On Wednesday, 17% of First Green's 66 employees will be getting a raise under the company's new "living wage" program.

Under that policy, no one will be paid less than $30,000 a year, or the hourly equivalent for part-time workers. That means the base pay at the bank will be roughly $14.40 an hour, or nearly double the Florida state minimum wage of $7.93.

"We don't believe in low wages. We don't need them to make money," Kenneth LaRoe, the bank's founder and CEO, told CNNMoney.

His payroll costs will go up, but not by much. LaRoe estimates initially it will cost the bank an additional $16,000 and then about $30,000 by the end of the year.

That's partly because he expects that employees who already make a little more than $30,000 will get larger-than-usual raises during their year-end reviews.

But over time, he believes the new policy will make the bank money by attracting and retaining the best workers.

By next year, LaRoe's goal is for 75% of his employees to earn an income that falls in at least the 90th percentile of pay for their positions and geographic location. In 2016, he wants that to be the case for 85% of his staff.

LaRoe expects to hit those goals in part by eliminating salary caps at the bank.

Until now, he said, if somebody hit the pay ceiling for their position, she couldn't get a raise without a promotion.

"That's just dumb," LaRoe said. "If you've got the best teller in the world, why don't you want to pay them the best wages?"

Imitation is sincerest form of flattery: LaRoe's living wage program is identical to one implemented this past spring by C1 Bank (BNK), another Florida-based business.

Trevor Burgess, C1 Bank's CEO, was raised by a single mother who worked as a secretary.

"I saw firsthand that you need a living wage. My bank was doing quite well. And I had 26 people [all women] who earned under $30,000. It was just the right thing to do," Burgess said.

What determines a living wage: There's no single definition, number or formula for a "living wage." It depends on factors like where you live, how big your household is and whether you're the sole breadwinner. It also depends on what you assume it should be able to pay for.

Most agree, however, that a living wage is very often higher than the minimum wage, especially for adults supporting children.

In arriving at $30,000 for their living-wage base, First Green and C1 Bank relied in part on a calculator created by Amy Glasmeier, a professor of economic geography at Massachusetts Institute of Technology.

The MIT calculator estimates the minimum needed to cover basic costs such as housing, food, childcare, transportation, medical care and taxes, not including potential government assistance.

Other living-wage and cost-of-living calculators exist, but they each use somewhat different assumptions.

Meanwhile, some cities have passed living wage laws that govern the minimum that employers must pay staff for city-contracted jobs.

Gap and other companies raising their minimum pay

Ikea lifting minimum wage to nearly $11 an hour

Small business owner: Seattle $15 wage plan is unfair to me

Are you a small business owner who has implemented a living-wage policy, or thought about it? We'd love to hear your perspective. Please email us at #YourEconomy.

First Published: September 29, 2014: 6:51 PM ET


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Does Ello have what it takes to be the anti-Facebook?

ello invite only Fear of missing out is attracting users to invite-only social network Ello.

NEW YORK (CNNMoney)

Ello co-founder Paul Budnitz said requests and approvals for access to the invite-only service were totaling 40,000 per hour. The LGBT community is embracing the site after being kicked off Facebook due to its "real" name policy. That, along with the promise of no advertising, are the reasons why some are calling it the "anti-Facebook."

But maintaining relevancy in a crowded social networking market won't be easy. A cyberattack that prevented users from accessing the site over the weekend is the least of Ello's problems.

Here's why:

It has to appeal to the vast majority -- not just a few loud dissenters.

History is not on Ello's side. Startup App.net, a platform for accessing many social applications on one network, kicked off in 2012 with a manifesto (much like Ello's). App.net founder Dalton Caldwell criticized Twitter (the service it considered itself to be an alternative to) for its ad-supported model. Dalton said Twitter users were the "product" -- the same basis for Ello's critique of Facebook.

App.net never took off.

Related: 6 things you need to know about STEM

It's really just the "vocal few" that take issues with Facebook's design or access to user data, according to Brian Solis, principal analyst at Altimeter Group. Feeling like a "product" isn't a universally felt complaint.

If a business model isn't broken, can it be fixed?

Unlike Facebook, which makes 90% of its money from advertisements, Ello doesn't sell ads. It plans on making money with a "freemium" model -- users can purchase special features to customize their Ello experience.

Budnitz lashed out at critics, saying it's "so sad" that people won't give Ello's business model a chance.

But free and "ad-free" don't really mix. App.net, which tried that combination, announced in March that it is no longer profitable enough to employ any staff.

FOMO is attracting users to the site -- but what will keep them there?

Ello is being flooded with invite requests, largely because it is in the news, and people have a fear of missing out (FOMO). But FOMO isn't enough to keep users on the site.

Related: Free startup advice from Silicon Valley's best

"As much as we love to hate [Facebook], they've done a really good job on focusing attention," said Solis. "The time spent on Facebook is unheard of -- and its not a fluke."

It's unclear why users will need to spend time on Ello, Solis said.

To Budnitz' credit, the product is still very much in development -- and his ambitions aren't as high as you'd think.

"We are, in fact, a five week old beta," he said. "It's being developed live in front of everyone's eyes."

The Facebook comparisons are "flattering," Budnitz said, but Ello is "not trying to take over the world."

Still, user frustrations, like a buggy-search feature (Budnitz said they've experienced some glitches with this search functionality last week), can have a resounding impact.

"You get one shot at it," said Solis. "If that network is open for beta, then it better be open for scale."

First Published: September 29, 2014: 5:12 PM ET


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PayPal now lets shops accept Bitcoin

Written By limadu on Minggu, 28 September 2014 | 14.44

paypal accepts bitcoin

NEW YORK (CNNMoney)

This week, the payment processing company PayPal took its first venture into the world of all-digital money.

Merchants that work with eBay's (EBAY, Tech30) PayPal can now easily start accepting payments from customers that use Bitcoin (XBT), an independent, government-less currency.

PayPal struck a deal with three Bitcoin payment-processing companies: BitPay, Coinbase and GoCoin.

Related: What is Bitcoin?

Bitcoin is an Internet-based system of money specifically designed to cut out middlemen, like banks and governments. So, it sounds odd to have Bitcoin processors. But they make it easier for everyday, non-tech-savvy businesses to accept bitcoins -- and immediately convert them to cash.

But why take bitcoins -- which have fluctuated in price from $1,100 and $400 in the last year -- instead of proven government money?

The system offers much lower transaction fees, which cost businesses a huge amount of money. The 2%-3% that shops pay in credit card swiping fees can obliterate their profits.

Consider this PayPal's first -- but not last -- foray into the world of Bitcoin. The company has made clear that its interest in Bitcoin runs more than skin deep.

In the last year, eBay's two top executives -- CEO John Donahoe and former president David Marcus -- have expressed interest in Bitcoin's technology.

Related: Here's why Bitcoin matters

PayPal's senior director of corporate strategy, Scott Ellison, told CNNMoney the company is most intrigued by the potential to harness the technology that lies at the heart of the Bitcoin system, a public ledger called a blockchain. It's a totally new way of thinking about transactions. It keeps records that are decentralized and keeps users semi-anonymous while making their transactions public.

"We think Bitcoin has tremendous opportunities going forward," Ellison said. "If you really want to understand how a technology works, you need to actually be in that technological space yourself."

Ellison said the move integrating Bitcoin into PayPal is a continuation of the company's view of itself as "the original payment disruptors."

Jose Pagliery is the author of Bitcoin - And the Future of Money (Triumph Books, Chicago).

First Published: September 26, 2014: 6:15 PM ET


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How iPhone apps could impact your insurance

apple health app Apple's new Health app in action.

NEW YORK (CNNMoney)

As part of Apple's (AAPL, Tech30) new mobile operating system, developers can build apps that measure things like heart rate, sleep, weight and blood pressure. If users choose to do so, they can then send that information to doctors for medical advice.

Health insurers, which are barred by Obamacare from denying coverage based on pre-existing conditions, can't base their decisions on this kind of information. But the situation is different for life insurers, who use medical records to make decisions about the relative risks of prospective customers.

"If I'm an insurance company, I'd want access to everything, all the data points, so I can make an informed business decision," said Bradley Shear, a lawyer who works on digital privacy issues.

Related: Apple fixes software bug in iPhone 6

Life insurers take all kinds of information into account as they make policy decisions: age, medical history, occupation, and whether you're a smoker, just to name a few. Whether and how health app data might figure into these decisions remains an open question.

"We don't traffic in hypotheticals," said Jack Dolan, a spokesman for the American Council of Life Insurers. "We have to underwrite using reliable information and sound actuarial principles."

But it's not hard to imagine how data like weight and blood pressure could figure into these calculations.

"If you lose a lot of weight in a short period of time, that may be an indication that you've got a health condition," Shear said.

Apple did not respond to requests for comment.

The insurance industry has already found ways of using tracking data in other contexts.

So-called "usage-based insurance," for example, is a fast-growing segment of the auto insurance market. With UBI, drivers agree to install devices from insurers that measure things like location, speed, miles driven and airbag deployment to help calculate rates.

There's also the possibility of health information being sought by plaintiffs in civil cases. Location data from toll tags like E-ZPass, for example, has previously been used in divorce proceedings.

Related: 6 things to love -- and hate -- about the iPhone 6

Of course, none of this means that you shouldn't share digital health information with your doctor, or that the information will be shared without your consent. But it's one more issue to be mindful of as more and more of our lives are tracked online.

"Doctors want this information, patients want this information and we're seeing safeguards put in place to show consumers how and when that information becomes part of your medical record," said Gerard Stegmaier, a privacy expert with the law firm Goodwin Procter. "It's a brave new world where we're going to have to figure things out as we go along."

First Published: September 26, 2014: 6:11 PM ET


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Hello Ello (Peace out, Facebook!)

ello Ello doesn't require your picture or your name to sign up.

NEW YORK (CNNMoney)

Earlier this month, the social media giant made headlines for suspending the accounts of several gay and transgender entertainers. The rationale? The accounts weren't in the holders' "real" names.

"The more they know about you, the more money they make," said Ello co-founder Paul Budnitz regarding Facebook. "I, quite frankly, don't care."

The platform, which is still in beta, launched just over a month ago with roughly 90 people and is still invite-only. This week, the site has seen an incredible surge in the amount of invite requests. He didn't specify the total number, but said that requests and approvals together often totaled 40,000 an hour.

Budnitz said they didn't expect the site to grow so quickly and are still developing its features. (He acknowledged this could mean a little bit of downtime).

Related: Free startup advice from Silicon Valley's best

According to Budnitz, Ello has "really been embraced by the LBGT community," as well as artists and performers.

Ello wants its users to feel more like people and less like data points. Users are free to be whoever they want so long as they abide by basic rules, like no bestiality or impersonation of public figures, according to Budnitz.

To join, all you need is an invite from a friend and an email address.

"We're not geo-locating, we're stripping IP addresses, we don't ask your name, your gender or sexual orientation. All I care about is that you obey the rules of Ello," said Budnitz, who is one of its seven founders.

About a year ago, they started the platform as a private social network for friends of friends to share their artwork and communicate. Eventually, they had 1,000 friends of friends who wanted in to the network, so they decided to open up the circle.

Related: 6 designers shaking up fashion

They received a $435,000 seed investment from FreshTracks Capital, a Vermont-based VC firm. (Budnitz also lives in Vermont, but other founders are located in Colorado.)

But how does a non-ad supported platform survive once the funding runs dry?

"Isn't it just so sad? Rather than cheering on a new model that actually makes things better, people have to say, 'You can't change things,'" said Budnitz. "Our business model is really simple, and proven. It's like an app store."

By that, Budnitz means they'll upsell users on special features to customize their Ello experience -- and he's confident that he'll be able to monetize the platform this way.

"We literally have thousands of people writing to us with feature suggestions, saying: these are the things I'd pay for."

The top request so far? People wanting to control a professional and personal profile with one log-in. Budnitz says they're likely to roll that out in the future and charge a one-time fee of $2.

First Published: September 26, 2014: 6:43 PM ET


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How iPhone apps could impact your insurance

Written By limadu on Sabtu, 27 September 2014 | 14.44

apple health app Apple's new Health app in action.

NEW YORK (CNNMoney)

As part of Apple's (AAPL, Tech30) new mobile operating system, developers can build apps that measure things like heart rate, sleep, weight and blood pressure. If users choose to do so, they can then send that information to doctors for medical advice.

Health insurers, which are barred by Obamacare from denying coverage based on pre-existing conditions, can't base their decisions on this kind of information. But the situation is different for life insurers, who use medical records to make decisions about the relative risks of prospective customers.

"If I'm an insurance company, I'd want access to everything, all the data points, so I can make an informed business decision," said Bradley Shear, a lawyer who works on digital privacy issues.

Related: Apple fixes software bug in iPhone 6

Life insurers take all kinds of information into account as they make policy decisions: age, medical history, occupation, and whether you're a smoker, just to name a few. Whether and how health app data might figure into these decisions remains an open question.

"We don't traffic in hypotheticals," said Jack Dolan, a spokesman for the American Council of Life Insurers. "We have to underwrite using reliable information and sound actuarial principles."

But it's not hard to imagine how data like weight and blood pressure could figure into these calculations.

"If you lose a lot of weight in a short period of time, that may be an indication that you've got a health condition," Shear said.

Apple did not respond to requests for comment.

The insurance industry has already found ways of using tracking data in other contexts.

So-called "usage-based insurance," for example, is a fast-growing segment of the auto insurance market. With UBI, drivers agree to install devices from insurers that measure things like location, speed, miles driven and airbag deployment to help calculate rates.

There's also the possibility of health information being sought by plaintiffs in civil cases. Location data from toll tags like E-ZPass, for example, has previously been used in divorce proceedings.

Related: 6 things to love -- and hate -- about the iPhone 6

Of course, none of this means that you shouldn't share digital health information with your doctor, or that the information will be shared without your consent. But it's one more issue to be mindful of as more and more of our lives are tracked online.

"Doctors want this information, patients want this information and we're seeing safeguards put in place to show consumers how and when that information becomes part of your medical record," said Gerard Stegmaier, a privacy expert with the law firm Goodwin Procter. "It's a brave new world where we're going to have to figure things out as we go along."

First Published: September 26, 2014: 6:11 PM ET


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