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DES MOINES, Iowa -- Another day, another billion dollar lottery jackpot.
At least, that's how it seems ahead of Tuesday night's Mega Millions drawing for an estimated $1.05 billion top prize.
It's a huge sum of money, but such giant jackpots have become far more common, with five prizes topping $1 billion since 2021 — and one jackpot reaching $2.04 billion in 2022.
The massive prizes are due in part to chance, but it's not all happenstance. Rising interest rates coupled with changes to the odds of winning are also big reasons the prizes grow so large.
HOW DO INTEREST RATES INCREASE JACKPOTS?
Nearly all jackpot winners opt for a lump sum payout, which for Tuesday night's drawing would be an estimated $527.9 million. The lump sum is the cash that a winner has actually won. The highlighted $1.05 billion prize is for a sole winner who is paid through an annuity, which is funded by that lump sum and will be doled out annually over 30 years.
That's where the higher interest rate becomes a factor, because the higher the interest rate, the larger the annuity can grow over three decades. The U.S. is in the midst of a remarkable run of interest rate increases, with the Federal Reserve raising a key rate 11 times in 17 months, and that higher rate enables a roughly $500 million lump sum prize to be advertised as a jackpot of about twice that size.
HOW DOES THE ANNUITY WORK?
A winner who chooses the annuity option would receive an initial payment and then 29 annual payments that rise by 5% each year. Opting for an annuity has some tax advantages, as less of the winnings would be taxed at the top federal income tax rate of 37%. It also could be an option for winners who don't trust themselves to manage so much money all at once.
If lottery winners die before 30 years, the future payments would go to their beneficiaries.
WHY DO WINNERS SNUB THE ANNUITY OPTION?
The annuities pay out big money, but not nearly as big as taking the lump sum.
For example, a sole winner of Tuesday night's Mega Millions could choose a lump sum of an estimated $527.9 million or an initial annuity payment of about $15.8 million. Of course, those annuity payments would continue for decades and gradually increase until the final check paid about $65.1 million, according to lottery officials.
In both cases, the winnings would be subject to federal taxes, and many states also tax lottery winnings.
Given all that, nearly all jackpot winners think they could make more money by investing the money themselves, or they simply want the biggest initial payout possible.
WHAT ABOUT THE ODDS OF WINNING?
That's another factor that has created so many huge prizes for those who match all six numbers.
In 2015, the Powerball odds were changed from 1 in 175.2 million to 1 in 292.2 million. Mega Millions took a similar action in 2019 by lengthening the game's odds from 1 in 258.9 million to 1 in 302.6 million.
For lottery officials, the hope was that by making it harder to win jackpots, the prizes would roll over for weeks and create truly massive pots of money that would in turn generate higher sales.
The result is that all of the billion dollar jackpots have come after the changes in the odds.
HOW LONG UNTIL THERE IS A WINNER?
Luck remains a big factor, as the odds of any ticket being a winner never changes. However, the more people who play Mega Millions, the more of the potential 302.6 million number combinations are covered.
For the last Mega Millions drawing on Friday night, 20.1% of possible number combinations were purchased. Typically, the larger the jackpot grows, the more people buy tickets and the more potential combinations are covered.
Tuesday night's drawing will be the 30th since the last jackpot winner. That is inching closer to the longest Mega Millions jackpot drought, which reached 37 drawings from Sept. 18, 2020, to Jan. 22, 2021.
The longest jackpot run was for a Powerball prize that stretched over 41 drawings and ended with a record $2.04 billion prize on Nov. 7, 2022.
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The top federal tax bracket has been corrected to 37%.
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Interest Rates
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- Trump's Manhattan civil fraud trial began week 3 on Monday with testimony by a Trump Org finance VP.
- He said CFO Allen Weisselberg told him, "Mr. Trump" wants his net worth numbers to go up each year.
- NY officials say this helps show Trump headed a conspiracy to defraud bankers and insurers.
One of Donald Trump's top finance executives on Monday gave the most powerful testimony yet supporting New York officials' claim that the former president was at the head of a longstanding conspiracy to defraud bankers and insurers about his net worth.
Patrick Birney confirmed this key contention by the New York attorney general's office – and his own earlier sworn deposition – by saying the former president personally told former Trump Organization Chief Financial Officer Allen Weisselberg that he wants his net-worth numbers to "go up" each year.
The testimony is key because it links Trump himself to the widespread fraudulent exaggerations in how Trump valued his properties that have already been proven by Attorney General Letitia James. She has alleged that Trump exaggerated his worth by up to $3.6 billion annually so he could save hundreds of millions in loan interest and insurance costs.
Birney's testimony helps link Trump directly to the top of this push for an ever-fatter bottom line.
"Did Allen Weisselberg ever tell you that Mr. Trump wanted his net worth on the Statements of Financial Condition to go up?" Eric R. Haren, special counsel to James, asked Birney as the morning's testimony drew to a close. It was the final line of questioning in Birney's three days on the witness stand.
"Yes," answered Birney, the Trump Organization's assistant vice president for finance operations.
"Where did that occur, your conversation with Mr. Weisselberg?" the lawyer asked.
"I think that happened in Allen Weisselberg's office," Birney answered.
"And approximately when did that occur?" the lawyer asked.
"Between 2017 and 2019," Birney answered, at which point the lawyer said, "Your honor, I have no other questions" and the finance executive was excused from the witness stand.
As bombshells go, this one had been well-forecast.
The AG's side mentioned the "Trump likes it to go up" directive in openings, and it's nothing Birney hadn't said before, and in somewhat greater detail, during a court-ordered deposition in the case from earlier this year.
"Allen Weisselberg told me Donald likes to see it go up in that period you just said," meaning 2017 - early 2020, Birney had told the AG's office in his deposition.
"Allen told me that," Birney said then. "He likes it to go up. And 'it' I don't think refers to assets. I think 'it' refers to net worth."
But getting Birney to support in open court this notion that Trump personally directed his finance people toward ever-higher net worths does check an important box for the AG's conspiracy case.
This is especially so since, for reasons they have not explained, the AG's side chose not to question Weisselberg last week about what role any Trump directives played in calculating the former president's bottom line.
Monday marks the start of the third week of testimony in James' $250 million civil fraud trial.
In deciding monetary and other penalties, the judge presiding over the non-jury trial, state Supreme Court Justice Arthur Engoron, must determine if Trump broke specific criminal laws, including conspiracy to falsify business records and to commit banking and insurance fraud.
The attorney general's lawyer, Haren, also used Birney's time on the stand Monday to suggest that not only Donald Trump, but Donald Trump, Jr., and Eric Trump were in the loop on major decisions about how the former president's golf courses and skyscrapers would be valued.
All three had minimized their involvement in the valuations at the center of the trial. But through Birney, Haren introduced internal Trump Organization correspondence showing that "the kids," as Birney called them in one memo, attended meetings and received hard-copy updates on the valuation process.
Trump is expected to attend the trial on Tuesday, Wednesday, and Thursday.
Trump's appearance at the defense table, which is not mandatory in a civil trial, had been scheduled to coincide with the planned testimony of his personal attorney-turned-nemesis Michael Cohen. But in a comical exchange in the afternoon, the sides bickered over Cohen's last-minute need to cancel his testimony due to an unforseen illness.
Trump's previous trial appearances, during the first week of testimony, were met with crowds, traffic jams, a limited gag order, and multiple mini-press conferences that doubled as campaign events in the courtroom hallways.
This story was updated to reflect later developments in Monday's testimony.
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Banking & Finance
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Being the mother of a child with a life-shortening condition can be an isolating experience.
Finding friends who understand what you are going through is often hard.
But a group of mothers who met through children's hospice Ty Hafan in Sully, Vale of Glamorgan, said the friendship and support they get from one another is second-to-none.
"No-one can really understand what you're going through," said Alex Forbes, whose 10-year-old Felix has a life-limiting neurological condition.
"It can be really, really lonely and there's been some really sad times during the years but when I'm with the other mums it just feels normal."
Alex, from Llantwit Major, Vale of Glamorgan, is part of a group of eight mums who will take on the Welsh Three Peaks Challenge - climbing Yr Wyddfa - also known as Snowdon, Cader Idris and Pen Y Fan all in one day to raise money for the hospice on 7 May.
She said the bond between them had deepened in recent months after spending many hours walking together training for the challenge.
Some of the mums are caring for their child with a life-shortening condition, others have lost a child but continue to be supported by the hospice.
When Alex's eldest child Felix was just 13 weeks old they were told he had a rare neurological condition called lissencephaly miller-dieker and would not live past infancy.
"Felix is completely dependent on us 24/7," said Alex, 42.
"There's everything from suctioning him, dealing with daily seizures, giving emergency medication, changing him, feeding him, it's basically like caring for a new born."
She said spending time with other mums who understand what she is going through had felt like respite.
"Having that bond with them - and we're all on different parts of our journey - it's something which you can't get from anybody else so I feel quite honoured that I'm part of this group," she said.
"There's nobody that understands like another Ty Hafan mum," said mum-of-five Marie Jones, 47 from Bridgend.
"Even though our stories are different our experiences are so similar, our thoughts and our feelings are very, very similar and that support is just well second-to-none really."
Marie's youngest, Alfie, 12, is unable to walk or talk, is deaf, partially sighted and needs someone to feed him.
His genetic condition is so rare it doesn't have a name and doctors are unable to predict what the future holds for him.
"In the beginning that was really difficult but over the years it just becomes normal," said Marie.
"We stopped worrying about what the future held a long time ago, there's no point in worrying about something you don't know."
She said having Alfie had given her a huge shift in perspective.
"Before Alfie, myself and my husband were both working full-time, life just passed us by... and when Alfie was born everything stopped and slowed down and when you slow down you realise how much of life you were missing before, it meant we appreciated everything and all the children a lot more."
Stacey Carr's son Kiegan died when he was three-and-a-half.
Kiegan had an unsafe swallow, was profoundly deaf, had impaired vision and dystonic cerebral palsy.
Her friendship with Marie began when both their children were on the ward at the hospice.
"You form a bond with the other mums," said Stacey.
"Even though I've lost Kiegan it is still a life I'm part of, it is never going to go away."
More than six years on, Stacey's other six children are being supported by Ty Hafan's sibling bereavement service.
"When we lost Kiegan⦠everyone else faded out but Ty Hafan were there and are still with us now," said the 34-year-old from Pyle in Bridgend.
"They've done memory boxes, they go out on trips, they do days out⦠it's just an amazing service as there's not much out there for children who've lost a sibling."
Stacey said she and another mum shared a particularly special moment during a recent walk up Cader Idris.
"We were having a conversation because we've had the same experience, we both lost our child, then at the bottom then we saw two little robins which put a smile on our faces, it was nice to know he's still there really," she said.
Ty Hafan supports about 274 children with life-shortening conditions and their families each year.
It costs about £5.2m every year to provide the hospice's care services and about 80% of this is met by donations from the public through fundraising, legacies and its commercial activities such as its lottery and shops.
Jenna Lewis, a director at Ty Hafan, said: "These families are having to deal with challenges on a daily basis that most of us couldn't possibly imagine, looking after a child who has a life limiting condition and whose life is going to be short.
"The parents we support often tell us that it's that network of people who are going through the same thing as them and understand the challenges they're facing on a daily basis is a big thing that really helps them."
The sheer amount of reliance and emotional strength in the group has left Alex feeling very optimistic about the challenge ahead.
"We called it Mums v Mountains because it symbolises what we do on a daily basis. It is like climbing a mountain every day - it is tough emotionally and physically," she said.
"Their strength is phenomenal and I know that's going to carry us all through."
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Nonprofit, Charities, & Fundraising
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- Texas dominates the U.S. bitcoin mining space, according to data from the world's largest mining pool, Foundry USA.
- Miners have migrated to Texas for its pro-crypto regulatory environment and support from the local energy provider, ERCOT.
- A lot of migration has come from southern and midwestern states like Nebraska, North Carolina, Kentucky, and Oklahoma.
Crypto winters don't scare Kevin Zhang, who has been in the business of mining bitcoin for ten years. He's lived through a few bear markets in the last decade, but no matter where he has set up shop — the U.S., Sweden, the Republic of Georgia, and China — he's survived every one. In fact, it is precisely when things look most grim for the sector that Zhang typically doubles down.
In 2013, for example, China banned bitcoin for the first time. The world's largest cryptocurrency immediately began to crash, and it was a slow bleed down in price for the next few years. As a wave of Western companies went bankrupt, Zhang decided to jump into mining.
"I saw an opportunity to leverage my Chinese language skills and cultural background to become one of the earliest and largest overseas customers of Chinese ASIC manufacturers," said Zhang, who was born in America but spent his early childhood in Beijing and Shenzhen.
For the next four years, he sourced gear and institutional knowledge from China, ultimately scaling up a site in Montana to become the largest bitcoin mining facility in North America. Zhang has since brought that same cavalier attitude to Foundry, a mining firm tucked under Barry Silbert's crypto empire.
In May 2020, bitcoin miners suffered two big blows: Much of the world shut down as Covid cases spiked and the most recent halving had just slashed the mining reward from 12.5 to 6.25 bitcoin per block mined. Zhang and the team at Foundry shrugged off the double whammy of blackswan events and spent hundreds of millions of dollars on its mining business, deploying tens of thousands of machines. By Nov. 2021, bitcoin hit an all-time peak of nearly $70,000.
But the stakes are higher this time around.
Bitcoin miners are barreling toward the "halving" — a major market-making event that some fear will be a death knell to many in the industry. It happens roughly every four years and refers to an inflation-curbing schedule baked into bitcoin's code where the reward for mining a new block of transactions gets cut in half. Historically, it also coincides with the start of a bull run in the price of cryptocurrencies.
Whereas traders eagerly await the halving, hoping for a potential spike in bitcoin's price, it represents a direct hit to revenues for miners, as they will receive 50% less bitcoin for every block they verify. In a capital-intensive industry with already tight margins, the reduced reward has the potential to prove apocalyptic for some operators.
"This is the ultimate test for miners," said Zhang, Foundry's senior vice president of business development. "Some may not make it through; some may. But I feel confident that if they work with us, and work with other strong actors, they may have a good chance to survive this."
When the halving takes effect in Apr. 2024, the reward for miners will drop to 3.125 bitcoin, or around $83,000. By comparison, the first blocks of bitcoin mined in 2009 carried a reward of 50 bitcoin.
Without a commensurate surge in bitcoin's price to counterbalance the diminished block rewards, many mining outfits — especially those burdened by rising energy costs, paying down on machines bought at peak pricing in 2021 — could get obliterated overnight.
But rather than seeing the 2024 halving as an extinction-level event, Foundry is expanding its operations — diving into machine sales, on-site deployment, and logistics.
FoundryX is a marketplace for buying and selling miners, both new and used — while their recently unveiled logistics arm deals in the deployment and shipment of miners across state lines and international borders. Managed site services is another program newly debuted where, for its U.S. customers, Foundry will help staff and manage miners on-site.
"Foundry is in this for the long haul," said Zhang. "We're taking a long-term bet on bitcoin and on the fact that bitcoin mining will survive and will bounce back even stronger."
After China launched a fresh campaign against bitcoin mining in 2021, much of the industry migrated west to the U.S. Since then, some states have battled it out to attract mining companies, while others have actively legislated against them.
The controversy goes to energy consumption. Mining at-scale involves data centers packed with highly specialized computers that crunch math equations in order to validate transactions and simultaneously create new tokens. It requires expensive equipment, some technical know-how, and a lot of electricity. Whereas places like Texas and Wyoming welcome the trade, New York lawmakers have created rules designed, in part, to keep miners out.
A mining pool lets a single miner combine its hashing power with thousands of other miners all over the world. Even though some miners opt to hide their geographic footprint with a virtual private network, pools still function as a useful gauge of the general geographic spread of the mining industry.
Foundry opted to show states even with small amounts of hashrate — an industry term used to describe the computing power of all miners in the bitcoin network — to demonstrate that mining is happening across the country on the Foundry USA Pool.
The new data also confirms that Texas has cemented its position as the crypto capital of the United States, as miners flock there for abundant clean energy and a permissive regulatory environment.
Texas made up 8.43% of the hashrate in the U.S. as of the end of 2021, and that percentage has jumped to 28.50% as of July 27, 2023 — though Foundry notes that the data was aggregated during a period of heavy curtailment in July, so Texas's percentage of actual hashrate is even greater than what's reflected on their latest map. Zhang added that Texas's growth in Foundry's map also had to do with the fact that the firm took on more clients there in the past two years.
Given that the U.S. is currently the world leader in terms of its share of the collective hashrate of the bitcoin network, that makes Texas the bitcoin capital of the world.
Texas has grown to dominate bitcoin mining partly because of support from local authorities and the operator of the Texas energy grid, ERCOT. ERCOT has historically struggled with fluctuating energy prices and sporadic service, so it strikes deals with flexible energy buyers like bitcoin miners to help keep excess energy online during low-demand cycles, then offers incentives for miners to stop their work, allowing that excess energy to flow back to the grid when demand is high.
Research from Castle Island Venture's Nic Carter and a collective of other industry practitioners including Lancium's Shaun Connell and the former interim chief of ERCOT, Brad Jones, found that over the past decade, instances of negative pricing surged considerably, accounting for more than 6% of all hours in 2022 across wholesale markets in the U.S. The research paper went on to note that negative priced power may increase further in Texas, in particular, given that the state is rapidly onboarding wind and solar to its grid. Those conditions are ideal for bitcoin miners.
"All you have to do is pay the miners slightly more than what they would have made mining for bitcoin that hour," said bitcoin mining engineer Brandon Arvanaghi, who now runs Meow, a company that enables corporate treasury participation in crypto markets. Arvanaghi calls the setup a "a win-win."
For years, Riot has been powering down operations at its Rockdale mine, about an hour from Austin, to help ease the burden on the state's grid. In July, for instance, bitcoin miner Riot Platforms raked in more than $31.7 million to keep its mining operations offline — $24.2 million came from energy sold back to the ERCOT grid and the other $7.4 million came via demand response credits.
"August was a landmark month for Riot in showcasing the benefits of our unique power strategy," said Jason Les, CEO of Riot, in a recent press release. "The effects of these credits significantly lower Riot's cost to mine Bitcoin and are a key element in making Riot one of the lowest cost producers of bitcoin in the industry."
Even during the bear market, Texas miners are building out, buying new sites and fresh fleets of hardware.
Riot Platforms, for example, has aggressive expansion plans in place in other parts of the state, including Navarro and Milam counties.
"Riot's ability to source such a significant expansion opportunity in Texas exemplifies the Company's partnership-driven approach with all stakeholders, including the Company's business partners, ERCOT, and all levels of government, to commit to sustainable economic development," Les said of the expansion plan.
Bitdeer, which operates its biggest facility four-tenths of a mile down the road Riot's mine in Rockdale, is also in expansion mode. The mining company was spun off from Chinese bitcoin mining giant Bitmain and went public via SPAC earlier this year.
Meanwhile, Cipher Mining purchased 11,000 new mining machines for its facility in Odessa, Texas, while Foundry has acquired mining sites from the bankruptcy estate of Compute North in Minden, Nebraska, and Big Spring, Texas.
Elsewhere in the U.S., previous leaders in bitcoin mining saw their influence wane.
In the last two years, Foundry's dataset shows that Georgia — a miner-friendly state offering competitive pricing on electricity, as well as a mix of renewable power sources including solar and nuclear, has seen its share of the U.S. hashrate plunge from 34.17% to 9.64%. The drop was driven by a combination of factors, including Texas's growth overall and Foundry's expanding operations in particular, as well as by measurement differences — one large miner in the state declined to have their activity included in this year's map.
Though its growth was stagnant compared to the previous study, New York's share of the U.S. hashrate declined from 9.53% in 2021 to 8.75%, driven mainly by the state's moratorium against new miners issued in Nov. 2022.
Other mining winners that showed notable growth during the period included New Hampshire and Pennsylvania, while Nebraska, North Carolina, Kentucky, Oklahoma and Washington all saw significant drops.
Despite the plunge in bitcoin valuations since 2021, as well as increasing regulatory scrutiny from the Securities Exchange Commission and other agencies looking to regulate some cryptocurrencies like securities, the total U.S. hashrate — a proxy for industry competition — has more than doubled since the end of 2021.
According to an analyst note from JPMorgan Chase on Sept. 1, the bitcoin network's overall hashrate set a record high for the eighth consecutive month in August. Foundry says the rise is driven in part by institutions entering the space.
JP Morgan researchers also note that the mining business has gotten less lucrative — miners make an average of $66,400 per day per exahash of mining capacity, versus nearly $342,000 at bitcoin's peak in Nov. 2021.
Meanwhile, the aggregate market cap of the 14 U.S.-listed miners tracked by the bank has plunged below $10 billion. Riot was the biggest loser in August, down 39%, while Bitdeer was the biggest winner, up 30%.
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Crypto Trading & Speculation
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The first Wilko shop closures will begin on Tuesday after the collapsed retail chain failed to find a buyer.
Stores including those in Liverpool, Cardiff, Acton and Falmouth are among 24 branches to shut, with a further 28 closing on Thursday.
It marks the beginning of the end of the Wilko brand on the High Street, with all 400 of the discount chain's shops set to close by October.
Around 12,500 staff are likely to lose their jobs.
Wilko fell into administration in August after struggling with losses and fierce competition from other discount chains, such as Poundland and The Range.
Doug Putman, the billionaire owner of music retailer HMV, had been trying to buy at least 100 Wilko shops but the deal fell through as rising costs complicated the deal.
On Monday, administrators PwC said that "despite extensive efforts" it had become clear that "no significant part of the Wilko operations can be rescued".
Rival B&M has agreed to buy 51 of Wilko's buildings in a £13m deal, but it is understood the stores will not be run under the Wilko brand.
Similarly, Poundland is understood to be interested in buying up to 70 Wilko stores and rebranding them to boost its own portfolio.
Meanwhile, retailers including Dunelm and Toolstation have urged Wilko employees to apply for roles at their businesses, saying they will be prioritised for vacancies.
On top of this week's store closures:
- Wilko's distribution centre operations will wind down on 15 September
- A further 124 shops will close between 17 and 21 September including sites in Bognor Regis, Humberstone in Leicestershire and Maidenhead
- PwC said timings for the closure of the remaining 222 stores will be announced in due course.
On Monday, one Wilko worker, who asked not to be named, told BBC News that she was "sick and tired now, everyone is stressed".
The employee, who has worked for the retail chain for 15 years, added that she felt "let down by Wilko, the union and the administration people".
Nadine Houghton, national officer at the GMB union, said: "Wilko was far more than a brand, a retailer or the products it sold, it was the thousands of loyal team members now facing an uncertain future."
Founded in 1930, Wilko had become one of Britain's fastest-growing retailers by the 1990s. However, more recently its large store portfolio became unsustainable, with the business owning too many shops in High Street locations at a time when out-of-city retail parks were becoming more popular with consumers.
Coupled with a lacklustre online offering, the family-run chain faced the perfect storm, analysts say.
Lisa Wilkinson, who was Wilko's chairwoman until January and who is the granddaughter of the chain's founder, said "everybody has thrown everything" at trying to save the business.
The following stores will close on Tuesday
- Acton
- Aldershot
- Barking
- Bishop Auckland
- Bletchley
- Brownhills
- Camberley
- Cardiff Bay Retail Park
- Falmouth
- Harpurhey
- Irvine
- Liverpool Edge Lane
- Llandudno
- Lowestoft
- Morley
- Nelson
- Port Talbot
- Putney
- Stafford
- Tunbridge Wells
- Wakefield
- Weston-super-Mare
- Westwood Cross
- Winsford
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Consumer & Retail
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Vested Expands Alternative Assets Portfolio, Adds P2P Lending, Bonds, And Solar
Through Vested Solar, investors can own solar panels in rooftop projects and earn 10-13% rate of return from the electricity generated over the panel's lifetime.
Digital investment platform Vested on Tuesday said it is expanding its alternative investment portfolio by offering of Peer-to-Peer (P2P) lending via Vested Edge, and INR (Indian Rupee) bonds and solar projects via Vested Solar.
With its solar offering, Vested is looking to give individuals the opportunity to earn while helping India transition to clean energy, a company statement said.
Through Vested Solar, investors can own solar panels in rooftop projects and earn 10-13% rate of return from the electricity generated over the panel's lifetime.
The INR bonds offer another alternate fixed income investment opportunity to Vested customers.
Vested offers a curated selection of listed corporate and government bonds, with corporate bonds rated A and above, and government bonds backed by the Indian government, offering 9-12% returns.
Vested Edge allows investors to add P2P lending to their alternative fixed income portfolio, offering potential returns of up to 12%.
Unlike other platforms, Vested Edge helps investors minimise risk by helping them automatically distribute their investments across multiple Reserve Bank of India-regulated P2P platforms, starting with two such platforms: Faircent and Lendbox, it stated.
Since the RBI's 2017 regulations, P2P lending has witnessed significant growth in India, with projections estimating a market size of $10 billion by 2026.
"Vested expands its alternative asset portfolio by offering investors easy access to peer-to-peer (P2P) lending via Vested Edge, bonds via INR Bonds, and solar projects via Vested Solar," it stated.
"We are excited to add additional alternative assets to our existing US investing offering. We believe that alternative assets are the future," Vested CEO Viram Shah said in the statement.
Over the next decade, "our investment portfolios will look very different from what they do today with investors participating in multiple assets like bonds, solar, P2P lending, real estate, global stocks and more, along with traditional mutual funds, FDs and gold", Shah stated.
We chose to add these three assets first, based on their market potential over the next 10 years and the safety guardrails inherent in these assets relative to other alternative assets, he said.
All in all, the company will continue working towards helping Indian investors diversify with ease, it stated.
Along with the new asset classes, the company has also launched its Vested Academy, which provides comprehensive information on alternative assets so that investors can make informed decisions.
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Renewable Energy
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Some people repeatedly sell themselves their own NFTs in an attempt to artificially inflate their prices, according to a report published Wednesday.
Called “wash trading,” the practice has long been speculated as key to the NFT market’s steep rise to an estimated $44 billion in sales last year, though it is difficult to definitively prove. But some examples are hiding in plain sight, according to a report by Chainalysis, a company that monitors blockchain technology, the digital ledgers that act as the backbone for cryptocurrencies and smart-contract assets such as NFTs.
NFTs, short for nonfungible tokens, are digital contracts that allow people to prove they own specific online assets, like official copies of a given artwork, and are usually bought and sold with cryptocurrencies, especially Ethereum. Enthusiasts bill NFTs as a new way to support art and own collectibles, with celebrities and some artists trying to profit from the technology.
But that market is also rife with problems, like digital pirates downloading and making a profit off of artists’ work without their permission.
In its report, Chainalysis identified and tracked NFTs that were sold back and forth at least 25 times by the same handful of cryptocurrency wallets — what the company’s analysts say are overt examples of wash trading. In the 110 profitable cases, sales from those NFTs made nearly $8.9 million.
It wasn’t a clearly effective strategy, however. The “most prolifiic NFT wash trader” that the study identified made 830 trades between their accounts but profited only $8,383.
Because smart NFT traders who wanted to hide their activity would likely use different Ethereum wallets for each transaction, the Chainalysis findings are likely only a small fraction of how many NFTs are wash traded, said Kimberly Grauer, director of research at Chainalysis.
“What this data set looks at is, of the individuals who were selling NFTs at scale, how many of them are actually just funding their own wallets?” she said.
“We built a very, very, very conservative estimate of what might be NFT-related wash trading,” she added.
Jarod Koopman, the director of cybercrime investigations for the Internal Revenue Service, which has increasingly cracked down on fraud cases involving cryptocurrency, said while the U.S. has clear rules regulating wash trades for stocks, the law is murkier when it comes to NFTs.
“There aren’t the regulations that are in place that are in the traditional finance sector,” Koopman said. But he said the IRS does look for instances where traders are “purposely manipulating the market to inflate it, to take advantage of other investors on the other side.”
While wash trading may seem like an easy way to drive up an NFT’s value, it’s not a foolproof plan, Grauer said. Every Ethereum transaction takes a small commission, called a gas fee, and a person repeatedly selling to themselves will have to keep paying that fee and hope they can eventually sell their NFT for enough to make up those costs.
Chainalysis found 152 clearly washed NFTs that were sold for a collective loss of more than $400,000, she said.
“The underlying sentiment is that all NFT activity is wash trading, but especially when it comes to times to pay gas fees, it’s not something that makes a whole lot of sense to do,” she said.
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Crypto Trading & Speculation
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IHCL Opens Doors Of Third Taj Property In The Metropolis
Leading hospitality chain Indian Hotels Company Limited (IHCL) of the Tata group, on Saturday announced opening of the doors of a Taj property located at New Town which will be its third luxury hotel in the metropolis after Taj Bengal and Taj City Centre.
Leading hospitality chain Indian Hotels Company Limited (IHCL) of the Tata group, on Saturday announced opening of the doors of a Taj property located at New Town which will be its third luxury hotel in the metropolis after Taj Bengal and Taj City Centre.
Christened Taj Taal Kutir, the property has been developed by the Ambuja Neotia group at a cost Rs 160 crore, and is the second such hotel in New Town. Taj City Centre in New Town has also been developed by the Ambuja Neotia group. Taj Taal Kutir will have 75 rooms along with an adjacent convention centre.
Puneet Chhatwal, MD&CEO of IHCL, said with the opening of the new Taj property, IHCL is addressing the growing demands of emerging micro-markets in the metropolis.
"West Bengal has been the launchpad for the eastern region of the country with seven properties being operational in the state under different brands like Taj, Vivanta and Ginger and SeleQtions."
There are several properties under development in the state, he said, adding that the West Bengal government's decision to grant industry status to the hospitality sector will fuel growth in this segment creating numerous job opportunities.
IHCL is also working closely with the West Bengal government to develop homestays in the state, he added.
According to him, IHCL will have a total of 325 properties under its fold by 2025-26, from the present number of 280. "IHCL will have a ratio of 50-50 of owned and managed properties by then", he said.
Chairman of Ambuja Neotia group Harshvardhan Neotia said the partnership with IHCL is growing stronger with the opening of the new Taj property. The group had already collaborated with IHCL for setting up Ganga Kutir, Chia Kutir and Raaj Kutir in West Bengal.
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Consumer & Retail
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The majority of English top-tier councils are planning to raise council tax by the maximum permitted, with the bill for average properties to increase from April by about £100 a year, according to a survey.
Despite widespread concerns over the cost of living crisis, about 75% of the largest authorities have opted so far for the full 4.99% rise, with all but one of the remainder increasing council tax by at least 2%.
Just one authority, Tory-run Central Bedfordshire council, has so far said it will freeze bills, while Westminster council, under Labour control for the first time in its history, has maintained the borough’s tradition of levying England’s lowest average council tax charge.
At the other end of the scale, three councils facing major financial difficulties after going effectively bankrupt have been given special dispensation by ministers to increase council tax bills beyond the 4.99% limit. Croydon’s bill will go up by 15%, while Thurrock and Slough councils will each raise bills by 10%.
The survey by the County Councils Network (CCN) covers 114 of 152 councils in England with responsibility for social care, with 38 yet to set a rate for 2023-24. These councils can normally levy a maximum 4.99% – 2.99% for general council tax and 1.99% ringfenced for adult social care.
However, even maximum council tax rises are unlikely to make a significant dent in the financial crisis affecting local authorities. Many will increase council taxes while making more cuts to services, as they battle high inflation and rising demand for social care – and in some cases possible bankruptcy.
Sam Corcoran, Labour vice-chair of the CCN and leader of Cheshire East council, said local authority leaders were setting budgets in the “most difficult circumstances” for decades, with many councils struggling to maintain levels of service and balance budgets.
“We all recognise the cost of living crisis is impacting on every household in the country and disproportionally on low incomes, but we have little choice but to propose council tax rises again next year, with many local authorities reluctantly opting for maximum rises,” he said.
He added: “With councils facing multimillion funding deficits next year, the alternative to council tax rises would be drastic cuts to frontline services at a time when people at the sharp end of the costof living crisis need us to be there for them.”
Despite inflation driving up costs by £16m next year, Central Bedfordshire council said “good financial management and planning”, together with use of financial reserves, had enabled it to freeze its share of council tax bills. “Given the pressures on households with the rising cost of living this is particularly important,” it said.
Westminster council, in the heart of the capital, has again set what it said was the lowest average council tax bill in England. It is limiting its increases of residents’ 2023-24 council tax bills to 2%, while unveiling plans to invest millions from reserves in free school meals for all primary school pupils, and £85m on buying ex-council homes to house homeless families.
Westminster band D households will pay £912 a year from April, an increase of £48. Nearby Hammersmith and Fulham council, which has the third lowest average council tax bill in England, is upping the charge by 4.99%, meaning an average bill of £1,306 (up £78).
The CCN said the typical band D bill for households in rural county areas is more than £2,000 a year and will rise to £2,149 on average with a 4.99% rise.
Westminster council’s leader, Adam Hug, said the council was not immune to the financial pressures faced by other councils. “Rolling out free school meals is something teachers and parents have welcomed. When we hear of pupils being sent to Westminster schools with two biscuits for lunch, this is an area where I know residents will want us to invest.”
Crisis-hit Croydon’s band D bill will be £2,230, an additional £234 a year. Croydon’s Tory executive mayor, Jason Perry, said: “I know this is going to be difficult for people in Croydon … but without the proposed increase, the council would need to make a further £20m of additional cuts this year, putting vital services to vulnerable residents at risk.”
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Inflation
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(Bloomberg) -- The first license under Hong Kong’s new crypto regime went to HashKey Exchange, legalizing the retail trading of tokens in the city as officials seek to foster a global hub for the digital-asset sector.
Most Read from Bloomberg
Hashkey has become the city’s first licensed trading platform with the upgrading of its existing licenses, and will now be able to offer services to retail investors, the company said in a Thursday statement. The Securities and Futures Commission has yet to issue a statement.
Hong Kong started a mandatory crypto framework in June, part of an effort to restore its image as a cutting-edge financial center. The pivot stirred substantial interest and contrasts with a US digital-asset clampdown, but the city has yet to win big investments from an industry chastened by a market rout last year.
HashKey and rival OSL were the only two crypto exchanges with permits under Hong Kong’s earlier voluntary licensing program.
HashKey Group operates in areas from venture funding to asset management and trading. The firm was in early-stage talks to raise $100 million to $200 million at a valuation above $1 billion, Bloomberg News reported in May.
Under Hong Kong’s new rules, crypto exchanges can offer trading to individuals and institutions if they secure and comply with licenses intended to curb the risky practices exposed by the 2022 crash and the collapse of the FTX platform.
Retail investors are restricted to larger coins like Bitcoin and Ether that feature in at least two acceptable, investible indexes. Requirements for risk assessments, insurance cover and asset custody could add to operating costs.
Cautious Reception
Crypto businesses are proceeding cautiously with new investments after a $1.8 trillion slump in token prices from a 2021 peak and thousands of job losses.
In a Bloomberg News survey in May, 15 major digital-asset outfits — including key exchanges that accounted for the vast bulk of crypto trading volumes — refrained from elaborating on specific investment plans for Hong Kong.
At the same time, the SFC has received dozens of inquiries and crypto firms such as Huobi, OKX and Amber Group have said they plan to apply for licenses. Hong Kong offers not just a local market but also a conduit to Chinese wealth, particularly if Beijing ever loosens a ban on crypto trading on the mainland.
The digital-asset industry is increasingly turning to Asia for growth opportunities as the region clarifies regulations. Hong Kong, Japan, Singapore and South Korea are among the jurisdictions seeking to woo crypto businesses.
They face competition from the likes of Dubai and the European Union. The US, meanwhile, is mired in a crypto fog caused by contradictory court judgments, a turf war between regulatory agencies and disputes about proposed legislation.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.
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Crypto Trading & Speculation
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TL;DR: As of July 28, get a Sam’s Club One-Year Membership with Auto Renew for only $24.99 — a 50% discount.
There’s more than one way to save money. Whether you’re cutting back on store trips, looking for bulk deals, or limiting fun things like travel, it can still be tough to stick to a budget. If you need a little help, you might be surprised by how many opportunities there are to try to save a little cash and time just by shopping at Sam’s Club. There are a lot of different places to look for savings, but there are four key opportunities to really pay attention to.
Bulk deals on groceries and home essentials
See if you can save by limiting your trips to the store simply by looking for bulk goods at a Sam’s Club warehouse. This might be Sam’s Club’s biggest claim to fame, and there’s good reason. Some shoppers have saved as much as 40% compared to supermarkets and big box stores.
Fuel savings for your car
Your Sam’s Club Membership gives you access to the Sam’s Club Fuel Center. Not every warehouse location has one, but if yours does, be sure to stop by. Gas prices there may run lower than what you’ll find elsewhere, and some reports put them 10-20% lower than the average cost in the area. Plus, it means that’s one more stop you don’t have to make later.
Pharmacy and Optical
Need to pick up your prescription? Or maybe a new pair of glasses? Stop by a Sam’s Club Pharmacy or Optical Center. Your membership gives you access to both of these services, but the Sam’s Club Plus Membership actually comes with extra savings for select supported medications.
Hotel and Travel
Planning a summer getaway? Or maybe you're getting ready to fly out and see your new college kid this fall? See if you can book your travel arrangements using your Sam’s Club Membership. Members may save up to 60% on hotel accommodations around the world.
Save 50% on a Sam’s Club Membership
See if Sam’s Club can help you budget through back-to-school season and still plan for fun.
Get a Sam’s Club One-Year Membership with Auto Renew for just $24.99.
Prices subject to change.
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Consumer & Retail
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Bitcoin’s Big Moves Are Being Magnified By A Protracted Lack Of Liquidity
A protracted dearth of liquidity in cryptocurrency markets is playing a key role in the more than 10% swings in the price of Bitcoin seen in recent weeks.
(Bloomberg) -- A protracted dearth of liquidity in cryptocurrency markets is playing a key role in the more than 10% swings in the price of Bitcoin seen in recent weeks.
Market depth remains at its lowest point this year even with the recent resurgence in trading activity being spurred on in part by expectations for a Bitcoin exchange-traded fund, FalconX’s research team found. They measure market depth by looking at the average volume of Bitcoin trading activities within 1% of its current price, on a 24-hour basis.
The drop in overall liquidity was dubbed the “Alameda Gap” last November by blockchain-data firm Kaiko. Alameda Research was the trading arm of Bankman-Fried’s failed FTX digital empire. The lingering effect is largely a result of the huge losses that market makers incurred after the meltdown of FTX, according to researchers at Kaiko. Bankman-Fried’s fraud trial resumes today.
On Oct. 16, Bitcoin jumped more than 10% in a matter of minutes as false report circulated saying that the US had approved a long-awaited ETF that invests directly in the cryptocurrency. It erased most of that increase just as quickly when BlackRock said its application was still with the SEC.
A similar spike was seen on Oct. 23 as traders speculated that a possible listing of a ticker for the proposed BlackRock fund suggested approval was imminent. The combination took Bitcoin above $35,000 for the first time in about 18 months. Bitcoin was little changed at about $34,540 in New York on Monday.
“It is difficult to ascribe a single narrative to the recent rally,” said Juthica Mallela, head of over-the-counter options trading at crypto exchange Kraken. “It is possible that the price movements stem from a combination of market positioning, spot buying, and a broadly positive macro landscape for Bitcoin which includes a spot Bitcoin ETF on the horizon.”
At the same time, Patrick Chu, head of institutional sales coverage in Asia Pacific at Paradigm, a liquidity provider for crypto derivatives, noted that the company had two days of record volume the past week at above $2 billion.
The “market has picked up massively in the last week as volatility comes back to life,” Chu said. “Market short gamma above $30K in BTC-driving price action, a lot of guys covering risk.”
However, on the spot market, the total trading volumes across centralized and decentralized exchanges are at multi-year lows, according to data compiled by crypto research firm Delphi Digital.
The market capitalization of stablecoins is another measurement used by analysts to gauge the health of the liquidity in the market, since stablecoins are used as key on- and off-ramps for crypto traders. They’re usually pegged to another currency, most often the dollar. The total market capitalization of stablecoins has been shrinking, according to data from tracker DeFiLlama.
One reason that the digital-asset market is not attracting new money could be the rising interest-rate environment. Decentralized finance, whether it’s peer-to-peer lending or automated market makers, once wooed investors with their promises of double- or triple-digit returns in an ultra low interest rate environment during the Covid-19 pandemic era. Now they are struggling, as yields in traditional finance are more attractive, and less risky.
“The fundamental reason why liquidity continues to flow out, as opposed to into crypto markets, is because of the high interest rates,” Michael Rinko, an analyst at Delphi Digital, said in a direct message.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
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Crypto Trading & Speculation
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Welcome back to Chain Reaction.
To get a roundup of TechCrunch’s biggest and most important crypto stories delivered to your inbox every Thursday at 12 p.m. PT, subscribe here.
This week was a busy one for crypto (per usual) with the SEC, PayPal, Coinbase and Microsoft leading the headlines. Let’s get into it.
This week in web3
- The SEC said in a court filing on Wednesday that it would file an “interlocutory appeal” for the federal court ruling on Ripple and the XRP token last month. Read more.
- Artificial intelligence has captured the hearts, minds and wallets of the technology industry. So it’s little surprise that Microsoft, which has several irons in the AI fire, is working to expand its footprint in the area. On Wednesday, the company announced that it is partnering with layer-1 blockchain Aptos Labs to work on AI and web3. Details here.
- PayPal is rolling out a stablecoin for payments and transfers. Yes, you read that right. Find out what that means for users and the traditional payment world here.
- Will the Law Commission’s digital assets final report make the UK a DeFi jurisdiction of choice?
- Coinbase reported its second-quarter earnings Thursday afternoon after the bell, beating market estimates. We dove into what it means for the company, so you don’t have to.
- Beacon, an early-stage web3 accelerator program, held its demo day on Wednesday during which the teams homed in on infrastructure, gaming, decentralized social media and DeFi, held its second cohort graduation on Wednesday. Learn more here.
The latest pod
Immutable is a web3 company consisting of two entities: Immutable Platform, a developer platform for building and scaling Ethereum-based web3 games, and Immutable Games, a web3 game developer and publisher. Some traditional gaming studios and IP holders are also building on its platform like GameStop, TikTok, Illuvium and NFT marketplace OpenSea, to name a few.
In March 2022, Immutable raised $200 million at a $2.5 billion valuation and last June it launched a $500 million developer and venture investment fund, which TechCrunch covered exclusively.
We discussed the web3 gaming market and how it’s grown in the past year and where it’s going in the future.
We also talked about:
- Creating value in games
- Mobile gaming vs web3 gaming
- Global adoption
- Advice for developers
Follow the money
- Spearbit raises $7M to improve security audits in crypto through its open marketplace
- Cube3.AI raised $8.2M in a seed round to improve web3 security
- SphereX also raised $8.2M to improve smart contract security
- Orbital raised $6.4M for to provide crypto solutions for traditional finance
- Institutional decentralized exchange D8X raised $1.5M in a pre-seed round
This list was compiled with information from Messari as well as TechCrunch’s own reporting.
What else we’re writing
Want to branch out from the world of web3? Here’s some articles on TechCrunch that caught our attention this week.
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Crypto Trading & Speculation
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Allen Weisselberg, the former chief financial officer of the Trump Organization, knows that he was involved in creating so-called statements of financial condition for former President Donald Trump for years.
He doesn't remember much else.
Weisselberg replied with variations of "I don't recall" to dozens of questions in a New York courtroom on Tuesday, where he testifiedaccusing him, Trump, two of Trump's sons and their company of years of fraud connected with the statements.
He didn't recall speaking with Trump, Donald Trump Jr., Eric Trump or their former fixer and attorney about the documents, which were crucial to the company's efforts to make deals with banks and insurers. He didn't recall the phrase "estimated current value," which both sides agree is crucial to understanding their arguments. He didn't recall details of "generally accepted accounting principles," noting he's not a certified public accountant.
Weisselberg admitted to learning at some point that Trump's roughly 10,000 square foot New York City apartment was being valued as if it was 30,000 square feet. But he couldn't say when, or with whom he discussed it.
He also acknowledged "periodically" receiving comments from Trump about the statements of financial condition before they were finalized, but could not recall specifics about any changes Trump might have sought.
The last time Weisselberg took the witness stand, the stakes for the company were vastly different. After a jury in December 2022 found two Trump Organization companies guilty on 17 criminal counts related to tax fraud, the company was ordered to pay $1.6 million in fines.
On Tuesday, he was appearing in a civil trial in which the New York attorney general is asking a judge to claw back $250 million from the company for alleged systematic fraud and impose a host of sanctions designed to severely restrict many of its businesses in the state. Weisselberg is a defendant, and so is Trump himself. Before the 2022 criminal trial, Weisselberg entered ato fraud and tax evasion. Company lawyers pinned the blame for fraud on him, repeating the phrase "Weisselberg did it for Weisselberg" like a mantra.
In this fraud trial, the attorney general wants to show Trump did it for Trump.
During a May deposition that's now an exhibit in the case, Weisselberg said his conversations with Trump about the statements were limited.
"It was more of just handing it to him and him taking it up to his apartment, maybe reading it in the evening, and making some notations giving it back to me," Weisselberg said, according to a transcript of the deposition.
The defendants are accused ofdesigned to falsely inflate Trump's wealth and the valuations of certain Trump properties. The goal, New York Attorney General Letitia James says, was to receive more favorable terms on loans than they deserved, and by doing so, benefit themselves by hundreds of millions of dollars.
Weisselberg worked for the company for nearly 50 years, going back to an era when Trump's father was at the helm. In January of this year, he signed a severance agreement with the company entitling him to $2 million paid in installments over two years, according to the May deposition.
Trump spoke about their long relationship in his own deposition in April.
"He was with me for a long time. He was liked. He was respected. Now, he's gone through hell and back. What's happened to him is very sad," Trump said.
Trump attended the first two and a half days of the trial last week, watching his longtime accountant Donald Bender on the stand. Bender testified that his company, Mazars USA, relied on figures provided to him by Trump Organization executives when compiling the statements of financial condition. In early 2022, Mazars dropped Trump and the company as clients, and recanted a decade of those statements.
Trump has denied any wrongdoing and has repeatedly attacked the case as politically motivated. He was not in attendance for Weisselberg's testimony.
for more features.
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Banking & Finance
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Government Asks Edible Oil Firms To Cut Cooking Oil Prices
A major importer of edible oils, India imported cooking oils worth Rs 1.57 lakh crore during 2021-22 marketing year.
The Centre on Thursday asked edible oil companies to cut the prices of cooking oils in line with the fall in global prices for the benefit of consumers.
A major importer of edible oils, India imported cooking oils worth Rs 1.57 lakh crore during 2021-22 marketing year (November-October).
It buys palm oil from Malaysia and Indonesia while soyabean oil is being imported from Argentina and Brazil.
"The decline in the price of edible oils should be passed on to consumers expeditiously", Food Secretary Sanjeev Chopra said during a meeting with leading industry representatives here.
Representatives from Solvent Extraction Association of India (SEA) and Indian Vegetable Oil Producers' Association (IVPA) were present at the meeting to discuss further reduction in the retail prices of cooking oils amidst a fall in the global prices, an official statement said.
Mother Dairy, which sells cooking oils under Dhara brand, on Thursday said it has reduced the maximum retail prices by Rs 15-20 per litre and the new stock will hit the market next week.
As per the government data, the retail price of packed groundnut oil on Thursday stood at Rs 189.13 per kg, mustard oil Rs 150.84 per kg, vanaspati Rs 132.62 per kg, soyabean oil Rs 138.2 per kg, sunflower oil Rs 145.18 per kg and palm oil Rs 110.05 per kg.
The food ministry said that international prices of imported edible oils are on a downward trend which gives a positive scenario for the edible oils sector in India.
"The industry informed that the global prices of different edible oils have fallen by $200-250 per tonne in the last two months but it takes time to reflect in the retail markets and the retail prices are expected to come down shortly", the statement said.
Edible oil associations have been advised to take up the issue with their members immediately and ensure that the MRP (Maximum Retail Price) of each oil be reduced in line with the decline in the international prices of edible oils with immediate effect.
Besides, the food ministry has asked for lowering the price at which edible oils are supplied to distributors by manufacturers and refiners.
Whenever a reduction in price to distributors is made by the manufacturers/ refiners, the benefit should be passed on to the consumers by the industry.
Some companies, which have not reduced their prices and their MRP is higher than other brands, have also been advised to reduce their prices,' the statement said.
Other issues like price data collection and packaging of edible oils were also discussed during the meeting.
Earlier also, the MRP of edible oils were reduced by the industry.
The reduction in oil prices had come in the wake of reduction of international prices and reduced import duty on edible oils making them cheaper.
"With the edible oil prices beginning to show a downward trend and are set to witness further reduction to be made by the edible oil industry, the Indian consumers can expect to pay less for their edible oils. The falling edible oil prices will help in cooling the inflation as well", the statement said.
The Department of Food and Public Distribution is closely monitoring and reviewing the prices of edible oils and steps in whenever any intervention is required to ensure the affordability of edible oils, it added.
The international and domestic prices of edible oils were on an upward swing during 2021-22 due to many global factors, including higher input and logistic costs.
"However, now the edible oil prices in the international market are witnessing a decline. The fall in the prices of edible oils in the domestic market is gradually being reflected in the domestic market which is providing relief to the consumers", the statement said.
India imports more than 50% of its total edible oil requirements.
From November 2022 to March 2023, imports of edible oils rose to 69,80,365 tonnes from 56,42,918 tonnes in the corresponding period of the previous oil marketing year.
India's edible oil import bill rose 34% to Rs 1.57 lakh crore in 2021-22 marketing year while in volume terms it rose 6.85% to 140.3 lakh tonnes.
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Inflation
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The IRS will test a free tax filing service in 2024 for a subset of lucky taxpayers in as many as 13 states, the agency announced today. Direct File, as the service is called, is a shot across the bows of Turbotax, H&R Block, and other paid tax prep services, whose owners have resisted free and simple tax filing for decades.
“This is a critical step forward for this innovative effort that will test the feasibility of providing taxpayers a new option to file their returns for free directly with the IRS,” said IRS Commissioner Danny Werfel in a press release announcing the news.
The program is more or less a direct result of funding provided by the 2022 Inflation Reduction Act, through which $15 million was earmarked for the purpose of exploring and implementing a simple, free, government-provided tax filing service.
Over the last year and a half, the IRS has been building out the pilot program, which it characterizes as being “one more potential option” on the continuum from self-managed Free File, to commercial products like Turbotax, to a tax prep professional.
The IRS describes Direct File as “a mobile-friendly, interview-based service” available in English and Spanish, intended for people with simpler tax situations like W-2s and common income credits and deductions. Whether the interviews are with actual people or some kind of automated or semi-automated process is unclear. But this, like many of its specifics, will likely change as the agency receives feedback from this limited scale pilot.
Arizona, California, Massachusetts, and New York are the four states that are integrating with Direct File for 2024 (i.e. the 2023 tax year); Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming “may also be eligible,” due to not having state income tax, but it is not final. Every state was given the opportunity to participate in the Direct File program, but not all were “in a position to join.”
Among the residents of these states, a limited number of individuals with “relatively simple returns” will have the opportunity to try Direct File. This will in turn “allow the IRS to evaluate the costs, benefits and operational challenges associated with providing a voluntary Direct File option to taxpayers.” In software terms, we’d probably call this an alpha.
Intuit and others which have surreptitiously fought against simple, free, and transparent tax filing for many years (as ProPublica documented not long ago) are no doubt seething and scheduling emergency meetings. Like broadband and mobile companies, public opinion has increasingly turned against them as the predatory nature of their services and lobbying has become obvious. When a free anime dating sim can do your taxes as well as a billion-dollar company, the worm has turned.
Expect to hear more about this program as tax season approaches.
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Personal Finance & Financial Education
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All of Wilko’s 400-plus stores are to close with the loss of more than 12,000 jobs after talks with potential buyers failed to deliver a rescue deal for the stricken retailer.
The GMB union said on Monday that the administrators, PwC, had informed staff that all of the chain’s 408 stores were set to close by early October.
Wilko’s two big warehouses, in Worksop, Nottinghamshire, and Newport, Wales – at which 299 staff have already been cut – are to close on Friday next week.
“Wilko was far more than a brand, a retailer or the products it sold, it was the thousands of loyal team members now facing an uncertain future,” said the GMB’s national officer Nadine Houghton. “No worker caused the downfall of Wilko. But they will be the ones who will suffer. Wilko should have thrived in a bargain retail sector that is otherwise strong.”
Last week, PwC announced the closure of 52 Wilko stores and the loss of more than 1,300 staff, including support centre workers and warehouse staff, but continued talks with prospective buyers.
On Monday, a rescue deal proposed by the owner of HMV that would have saved about half of Wilko’s stores and secured the future of thousands of jobs collapsed.
Doug Putman, who engineered a turnaround of HMV in the UK and owns Toys R Us in Canada, had been negotiating a deal to save as many as 200 of Wilko’s 408 stores, throwing a lifeline to its more than 12,000 staff.
A £13m deal struck by the discount retailer B&M last week to save 51 properties did not include saving staff jobs, as the deal was only for the sites the retailer occupies.
Administrators remain in talks with Poundland over about 100 stores. However, if a deal is struck it would happen after the Wilko stores are shut and would not include the transfer of staff.
The discount retailer The Range is seeking a deal for the Wilko brand.
Putman’s plan, which offered the best chance of saving stores and jobs, originally involved trying to keep 300 stores and their staff running.
“It is with great disappointment that we can no longer continue in the purchase process for Wilko having worked with administrators and suppliers over several weeks to seek a viable way to rescue it as a going concern,” he said.
The deal ran into trouble earlier this month when some big suppliers, including Unilever and Procter & Gamble, which supply many staple household cleaning and food products, said they wanted their debts repaid now in order to continue to guarantee supplying Wilko’s stores.
There were also concerns that some suppliers, which cancelled shipments to Wilko’s stores when the chain went into administration last month, would not be able to ship products for another six weeks.
“We had financing in place and received the full support of [the administrators] PWC, Wilko management and staff representatives, which we are deeply thankful for considering what a challenging time it has been for them,” Putman said.
“However, commitment to overhauling the trading framework of the business with partners and the costs of running Wilko’s legacy operations infrastructure combined has meant that a stable foundation could not be secured to ensure long-term success for the business and its people in the way that we would have wanted.”
The retailer, which was founded in 1930 when JK Wilkinson opened his first store in Leicester, took over stores left empty when Woolworths collapsed in 2008.
“It looks like the famous red and white shopfronts will be dismantled and Wilko will join Woolworths in the high street history books,” said Susannah Streeter, the head of money and markets at Hargreaves Lansdown. “The ditched deal could not come at a worse time for the high street, with its fortunes looking increasingly crushed amid the cost of living crisis and competition from online.”
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Consumer & Retail
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Sir Keir Starmer is facing a backlash from Labour MPs over his 'mad green' schemes, amid fears that he is in thrall to ex-party leader Ed Miliband.
Angry Labour backbenchers are blaming Mr Miliband, the Shadow Climate Change Secretary, for controversial plans to ban all new North Sea oil and gas projects.
The dramatic move, expected to be announced in a speech by Sir Keir this month, is designed to underline the party's commitment to transforming the UK into a clean energy superpower.
But last night, the plan was branded 'mad green nonsense' by Red Wall MPs who blamed 'Election loser' Mr Miliband, who led the party to defeat in 2015, for forcing these ideas on Sir Keir.
One Labour MP said: 'This is all Miliband. But it's all middle- class b*****ks.
'We won't reach our targets for converting to electric cars and we may end up simply importing fossil fuels from abroad.
'And the average person in my constituency doesn't buy new cars – a lot of them are running around in older ones.'
There are also concerns about Labour's much-trumpeted plan to borrow £28 billion a year in order to tackle climate change and transform the economy.
This money would be spent on the likes of the hydrogen industry, offshore wind turbines and home insulation programmes.
One Shadow Cabinet Minister insisted privately last week that this huge budget had to pay for more than Mr Miliband's green agenda, with another frontbencher warning that 'voters care more about jobs than green stuff'.
Some Labour MPs have long harboured resentment over Mr Miliband's return to the Labour front bench in 2020, after he effectively paved the way for hard-Leftwinger Jeremy Corbyn to take over the party in 2015.
Mr Miliband is also still mercilessly mocked for his 'Edstone' plan, which involved carving Labour's key Election pledges into an 8ft 6in slab of stone.
This would have been placed in the Downing Street garden had he won in 2015.
However, The Mail on Sunday was told that Mr Miliband, who led the party from 2010 to 2015, holds sway over Sir Keir, who was grateful for Mr Miliband's help in finding him a Commons seat in 2015.
One former Labour Minister claimed such was their relationship that, had Mr Miliband won the Election, Sir Keir – a former Director of Public Prosecutions – could have been made Attorney General immediately.
But one Labour insider said last night that tensions over Mr Miliband's continued influence were 'nothing new' and that Sir Keir held the whip hand.
The party sought to ease concerns over the scale of the £28 billion borrowing plan yesterday by stressing that 'like other policies, it will abide by our fiscal rules'.
And Mr Miliband came out fighting with a claim that Labour's plans to turn the UK into a 'clean energy superpower' would create up to 500,000 jobs over the next seven years.
He said it would lead to new jobs in Scotland's world-leading offshore wind industry; the North-West and Teesside's hydrogen sector; and nuclear power in the South East.
Mr Miliband said: 'For too long, the Conservatives and SNPs have let other countries get ahead in the race for the green jobs of the future.
'Britain can win this global race – building new opportunities for our construction industry, our engineers and our electricians – but we are being let down by a Conservative government.'
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Renewable Energy
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On Wednesday, the Internal Revenue Service (IRS) notified Microsoft that it may owe $28.9 billion in back taxes, plus penalties and interest, from 2004 through 2013. The IRS says it believes that as of Sept. 30, its tax adjustments are correct and will elevate the issue to judicial proceedings, if necessary.
Microsoft disputed the claims, saying in a press release that the IRS’ adjustment is not final and does not take into account the Tax Cuts and Jobs Act, which the company says could decrease its financial obligations by up to $10 billion. The IRS said in an 8-K filing that Microsoft confirmed it received the Notices of Proposed Adjustment on Oct. 11, but it doesn’t expect the situation to be resolved within the next 12 months.
Microsoft’s VP for worldwide tax and customs, Daniel Goff, said in the company’s press release that it has changed its practices and corporate structure since 2013, and that “... the issues raised by the IRS are relevant to the past but not to our current practices.” Goff added that Microsoft will work with the IRS to hopefully “reach a mutual resolution” but denies that the company owes the taxes claimed by the IRS.
“Microsoft disagrees with these proposed adjustments and will pursue an appeal within the IRS, a process expected to take several years,” Goff said. “We believe we have always followed the IRS’ rules and paid the taxes we owe in the U.S. and around the world. Microsoft historically has been one of the top U.S. corporate income taxpayers. Since 2004, we have paid over $67 billion in taxes to the U.S.”
The 8-K filing comes after the IRS announced last month that it was adding AI tools to identify potential tax evasions, according to a press release. The IRS said at the time that it was focusing on wealthy taxpayers, including companies, that used “sophisticated schemes to avoid taxes” and would identify individuals with more than $250,000 in recognized tax debt.
The company was recently targeted by the Federal Trade Commission (FTC) which strove to secure an injunction against Microsoft’s acquisition of Activision Blizzard for $68.7 billion. Microsoft successfully overcame that hurdle after the U.S. Appeals Court for the 9th Circuit denied the FTC’s motion to block Microsoft’s acquisition. Microsoft is expected to close its deal with Activision on Oct. 13.
Microsoft did not immediately respond to Gizmodo’s request for comment sent outside regular working hours.
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Banking & Finance
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BharatPe Turns Operationally Profitable For First Time In October
BharatPe's annualised revenue rose past Rs 1,500 crore in FY24, up 31% from FY23, it said.
Fintech unicorn BharatPe has turned Ebitda-level profitable for the first time in October.
"This financial milestone is attributed to consistent growth across all its business lines. The company has also significantly cut down its Ebitda burn—which was averaging at Rs 60 crore per month in FY23—to attain Ebitda positivity," the company said in a statement on Tuesday.
BharatPe's annualised revenue rose past Rs 1,500 crore in FY24, up 31% from FY23, it said.
In October, the company facilitated loans worth over Rs 640 crore for its merchants, in partnership with its NBFC partners. It recorded a monthly total payment volume of over Rs 14,000 crore across its payment products.
"In the coming months, we'll focus on scaling our lending, point-of-sale, and soundbox businesses. We will also focus on launching new products tailored for our merchant partners, while concentrating on the development of our consumer and NBFC businesses," said Nalin Negi, chief financial officer and interim chief executive officer, BharatPe.
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Banking & Finance
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Walmart reported strong first-quarter sales results as the nation’s largest retailer’s low-prices continue to draw budget conscious consumers in a challenging economic environment of stubbornly high inflation, particularly in groceries.
The company beat Wall Street expectations Thursday and boosted its annual profit and sales outlook.
Comparable store sales — those from established stores and online operating over the past 12 months — rose 7.4% in the quarter ended April, a bit slower than the 8.3% during the fourth quarter but still impressive.
Global online sales surged 26%.
Shares rose 1% Thursday.
“Globally, customers continue to seek value given the impact of inflation,” CEO Doug McMillon told analysts Thursday. “We see it in the US and in other markets like Mexico, Canada and Chile.”
Other major retailers posted quarterly results this week, and there was a marked slowdown in spending, an environment in which Walmart can thrive due to its focus on low prices and a focus on necessities like groceries.
Groceries account for more than half of Walmart sales.
Walmart said its groceries market share is growing among higher income shoppers and younger customers.
But the Bentonville, Ark., company also said shoppers remain cautious, trading down to private label goods from more expensive national brands. It noted sales slowed at the end of the quarter as the pandemic-era SNAP benefits — the monthly food-assistance vehicle commonly known as food stamps — expired.
That cautiousness was on display this week in quarterly reports from major US retailers.
Home Depot, the nation’s largest home improvement retailer, said Tuesday that sales for the first quarter fell 4.2%, and it expects its first annual revenue decline since 2009.
On Wednesday, Target reported another quarterly profit decline and issued a cautious sales and profit outlook.
The Minneapolis company is dealing with rising costs, which includes rising theft as a big factor.
Target has been more vulnerable to shoppers’ focus on necessities as roughly 20% of it total sales are from groceries.
And despite modesty stronger spending last month, recent government data revealed how Americans are barely keeping up with inflation.
Walmart reported net income of $1.67 billion, or 62 cents per share for the three month period ended April 30.
Earnings, adjusted for non-recurring costs, came to $1.47 per share, far exceeding the per-share earnings of $1.32 that Wall Street was looking for, according to a survey by FactSet.
That compares with $2.05 billion, or 74 cents per share, in the year ago period.
The retail sector has been under strain as millions of shoppers shift from buying clothing and home furnishings, to necessities.
Walmart, however, said its seen easing costs in its supply chain and freight from last year, which will can improve margins.
General merchandise costs are now lower than a year ago in the US, McMillon said, but they’re still higher than two years ago.
In grocery and consumable categories like paper products, Walmart is still seeing high single digit to low double digit inflation in the cost of goods.
“The persistently high rates of inflation in these categories, lasting for such a long period of time, are weighing on some of the families we serve,” McMillon said.
The cumulative effect of stubborn inflation will create more uncertainty in the second half of the year, McMillon said, adding that the company is working with suppliers to bring costs down.
Walmart’s overall sales rose 7.6%, to $152.3 billion, which is also better than most had projected.
Walmart’s namesake chain posted a net sales increase of 7.2%, while its international business saw a 12% uptick.
Sam’s Club had a 4.5% increase in net sales.
Walmart expects that consolidated net sales will rise 3.5% this year, higher than the previous guidance of 2.5% to 3%.
The retailer also projects that per share results for the year will be $6.10 to $6.20, up from the previous range of $5.90 to $6.05.
For the current quarter, it expect per share results to be in the range of $1.63 to $1.68, below Wall Street estimates of $1.71.
Shares rose $1.35 to $150.88 Thursday.
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Inflation
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India’s Preference For ‘Plain Vanilla' Products Seen A Hurdle For Private Debt
Indian regulators’ preference for straightforward financial products is a challenge for the private credit market and its bespoke deals, according to a partner at one of the country’s top law firms.
(Bloomberg) -- Indian regulators’ preference for straightforward financial products is a challenge for the private credit market and its bespoke deals, according to a partner at one of the country’s top law firms.
“Our regulators prefer plain vanilla products,” Leena Chacko, partner at Cyril Amarchand Mangaldas in Mumbai, told Bloomberg Television on Monday. “That can be a challenge for structuring a transaction, because there are limitations as to what can be done.”
Private credit — which often involves customized deals with floating rates of interest — mushroomed into a $1.6 trillion global market, as investors hunted for returns in a world of ultra-low yields. In India, regulatory constraints on bank lending have allowed credit funds to gain a foothold.
Setting up a special purpose vehicle can be difficult, and there are also restrictions on the equity components of a deal, Chacko said.
“There are issues in relation to the enforcement process— there’s a lot of backlog in the courts,” she told Rishaad Salamat. “As a result of which recovery can be quite challenging.”
--With assistance from Anto Antony.
©2023 Bloomberg L.P.
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Banking & Finance
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Within a decade, around 39% of the time spent on housework and caring for loved ones could be automated, experts say.
Researchers from the UK and Japan asked 65 artificial intelligence (AI) experts to predict the amount of automation in common household tasks in 10 years.
Experts predicted grocery shopping was likely to see the most automation, while caring for the young or old was the least likely to be impacted by AI.
Researchers from the University of Oxford and Japan's Ochanomizu University wanted to know what impact robots might have on unpaid domestic work: "If robots will take our jobs, will they at least also take out the trash for us?", they asked.
Robots "for domestic household tasks", such as robot vacuum cleaners "have become the most widely produced and sold robots in the world" the researchers observed.
The team asked 29 AI experts from the UK and 36 AI experts from Japan for their forecasts on robots in the home.
Researchers found that male UK experts tended to be more optimistic about domestic automation compared with their female counterparts, a situation reversed in Japan.
But the tasks which experts thought automation could do varied: "Only 28% of care work, including activities such as teaching your child, accompanying your child, or taking care of an older family member, is predicted to be automated", said Dr Lulu Shi, postdoctoral researcher, Oxford Internet Institute,
On the other hand, technology was expected to cut 60% of the time we spend on grocery shopping, experts said.
But predictions that "in the next ten years" robots will free us from domestic chores have a long history and some scepticism may be warranted. In 1966, TV show Tomorrow's World reported on a household robot which could cook dinner, walk the dog, mind the baby, do the shopping, mix a cocktail and many other tasks.
If its creators were only given £1m the device could be working by 1976, ran the news story...
Ekaterina Hertog, associate professor in AI and Society at Oxford University and one of the study authors draws parallels with the optimism which has long surrounded self-driving cars: "The promise of self-driving cars, being on the streets, replacing taxis, has been there, I think, for decades now - and yet, we haven't been able quite to make robots function well, or these self-driving cars navigate the unpredictable environment of our streets. Homes are similar in that sense".
Dr Kate Devlin, reader in AI and Society at King's College, London - who was not involved in the study - suggests technology is more likely to help humans, rather than replace them: "It's difficult and expensive to make a robot that can do multiple or general tasks. Instead, it's easier and more useful to create assistive technology that helps us rather than replaces us," she said.
The research suggests domestic automation could free up a lot of time spent on unpaid domestic work. In the UK, working age men do around half as much of this unpaid work as working age women, in Japan the men do less than a fifth.
The disproportionate burden of household work on women has a negative affect on women's earnings, savings and pensions, Prof Hertog argues. Increasing automation could therefore result in greater gender equality, the researchers say.
However, technology can be expensive. If systems to assist with housework are only affordable to a subset of society "that is going to lead to a rise of inequality in free time" Prof Hertog said.
And she said society needed to be alive to the issues raised by homes full of smart automation, "where an equivalent of Alexa is able to listen in and sort of record what we're doing and report back".
"I don't think that we as a society are prepared to manage that wholesale onslaught on privacy".
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Consumer & Retail
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Bud Light’s steep sales drops are showing signs of bottoming out — but the struggling beer brand is still on track to losing its No. 1 status in the US following its disastrous marketing tie-up with Dylan Mulvaney.
Sales of Bud Light plunged 23.9% for the week ended May 27 — slightly better than the 25.7% drop a week earlier and marking the first time that the sales decline didn’t grow worse versus the previous week, according to data from Bump Williams Consulting and NielsonIQ.
Drops for Anheuser-Busch’s other brands — including Budweiser, Michelob Ultra, Busch Light, Natural Light — also saw narrower drops than a week earlier amid a wider backlash against Bud Light and its parent company.
“Perhaps the bottom has been hit and we are seeing a turn-around in performance,” Bump Williams, head of the eponymous consulting firm told The Post.
Anheuser-Busch’s $15 rebate on 18 packs and larger amounts of Bud Light surely boosted sales over Memorial Day weekend, experts said.
The brewer discounted the brand from May 17 through May 31, and shoppers were scooping up $20 cases of Bud Light for $5 or even less in some states, according to reports.
“Price probably has a lot to do with improved trends,” Williams said. “I expect to see a lot more price discounting on [Anheuser-Busch’s] portfolio this summer to try and persuade consumers to come back.”
Sales volume — or number of cases sold containing 12 cans or more — was down 27.8% compared with 29.5%, marking the first time the declines didn’t grow steeper in the seven weeks that this data has been tracked,
Nevertheless, the 20%-plus declines are endangering Bud Light’s its perch as the No.1 beer in the US as Modelo has been outselling it for weeks now.
During the week ended May 27 Modelo Especial’s sales grew by 9.5% compared to a year ago and its sales volume was up by 4.7%.
The beer brand’s market share is 8.2% compared with Bud Light’s 7.2% for the week.
Year to date data shows that Bud Light remains the No.1 beer at 9.1% market share compared with Modelo’s 8.0 market share, according to Bump Williams Consulting and NielsonIQ.
Bud Light had better reverse the declines soon it hopes to retain shelf space at retailers, a former Anheuser-Busch executive warned.
Anson Frericks, who headed Anheuser-Busch’s sales and distribution department, said retailers usually “reset” shelf space allocations in the spring and fall.
“[Retailers] generally take sales data from April, May, June, July, and then based off of that data in that time period, they will reallocate shelf space,” Frericks told DailyMail.com over the weekend.
“That shelf space will be allocated to Miller Lite, Coors Light, Yuengling, and some of the other brands that have taken share from them,” Frericks said.
Mulvaney posted two videos and images of herself as a Bud Light marketing partner on April 1, including one of her in a bubble bath surrounded by Bud Light cans.
Another image included a 16 oz can of Bud Light with her face on it — a commemorative can that was given to her to celebrate her one-year anniversary as a woman.
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Consumer & Retail
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BSE Gets A New 'Buy' As Jefferies Expects Earnings Surge
The research firm has set a target price of Rs 2,700 apiece on the stock, implying an upside potential of 24%.
BSE Ltd.'s earnings may jump 150% in the ongoing fiscal and and double over two years through March 2026 on strong growth and higher margins, according to Jefferies.
The research firm initiated its coverage on Asia's oldest exchange with a 'buy' and target price of Rs 2,700, implying an upside potential of 24%.
Indian stock exchanges are benefiting from healthy GDP growth, rising market capitalisation/GDP ratio (India at 100% against 130-200% for peers), financialisation of savings and rising equity market participation, Jefferies said in a Nov. 27 note. "Moreover, exchanges are insulated from the risks of compression in fees, unlike the debate between active and passive AMCs as well as discount and full-service brokers."
Over the past five years, a surge in investor participation and sachetisation has lifted derivatives volumes by 10 times, the research firm said.
While NSE has been dominating the segment with a 100% market share, BSE's recent relaunch of options has found success as it addressed the market gaps for sachet derivatives. Within six months, that lifted its turnover market share to 14% from less than 0.5%.
"Under the new management, BSE has seen strong back-end execution of new products, and we believe the company's changing profile with higher market share can drive network effects in other products and open up newer monetisation avenues," the note said.
"Over FY23–26E, we expect BSE to deliver a revenue CAGR of 45% and, aided by margin expansion, a higher earnings CAGR of more than 70%."
Rise Of Digital Discount Brokers
After the Covid-19 pandemic, the number of active investors on the National Stock Exchange has increased significantly. The overall investor base has grown fourfold to over 11 million. In the derivatives market, the count has surged 10-fold to 4 million. The drivers of this huge onboarding have been the digital discount brokers, whose investor base has become 5–6 times larger than traditional brokers, Jefferies said.
BSE's Multi-Year Transformation
BSE's tech integration with brokers and members was a large enabler of the option volume ramp-up, according to Jefferies. Cost-saving initiatives like the winding down of the legacy 'liquidity enhancement scheme' have been margin-accretive.
Going ahead, the improved volume throughput will open up newer monetisation avenues for BSE like co-location services, it said.
"With steady growth in cash equities (20% of revenue mix) and mutual fund processing (10% of mix) and recurring fee income in corporate services (35% of revenues), the ramp-up in the derivatives segment will lead to an improved long-term growth outlook for BSE," Jefferies said.
Jefferies said operating leverage and a changing revenue mix will place BSE's operating margins—40% currently versus 69% for market leader NSE—on a multi-year expansion path.
Risks From Competition, Regulations
The key risk will be higher competition from the NSE as it can reduce or reverse market share gains and may drag product margins, Jefferies said.
On the regulatory side, according to the brokerage, recent actions include raising cash margin requirements to 50%, an in increase transaction tax by 25%, and enhanced risk disclosures.
Of the seven analysts tracking the company, four maintain a 'buy' and three recommend a 'hold', according to Bloomberg data. The average 12-month consensus price target implies an upside of 11.3%
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Stocks Trading & Speculation
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WeWork Goes Bankrupt, Capping Co-Working Company’s Downfall
The company listed both assets and liabilities worth $10 billion to $50 billion in a Chapter 11 petition filed in New Jersey.
(Bloomberg) -- Former high-flying startup WeWork Inc. filed for bankruptcy, marking a fresh low for the co-working company that struggled to recover from the pandemic and its failed initial public offering in 2019.
The New York-based company listed both assets and liabilities in the range of $10 billion to $50 billion in a Chapter 11 petition filed in New Jersey. The filing allows WeWork to keep operating while it works out a plan to repay its debts.
The company reached a sweeping debt restructuring deal in early 2023, but quickly fell into trouble again. It said in August that there was “substantial doubt” about its ability to continue operating. Weeks later, it said it would renegotiate nearly all its leases and withdraw from “underperforming” locations.
WeWork’s real estate footprint sprawled across 777 locations in 39 countries as of June 30, with occupancy near 2019 levels. But the enterprise remains unprofitable.
The company went public in 2021 through a combination with a special purpose acquisition company, two years after its planned IPO was infamously scuttled amid investor concerns about the company’s governance, valuation and growth prospects. The failed deal led to founder Adam Neumann’s resignation as chief executive officer and led to a dramatic slide in WeWork’s valuation, which once stood as high as $47 billion.
Other shared office space firms have also stumbled after the pandemic upended working habits. Knotel Inc. and subsidiaries of IWG Plc sought bankruptcy in 2021 and 2020, respectively.
©2023 Bloomberg L.P.
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Real Estate & Housing
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- Crypto firms DCG and Gemini allegedly defrauded investors out of a collective $1.1 billion, New York prosecutors alleged.
- The firms had significant exposure to defunct crypto trading desks Three Arrows Capital and Sam Bankman-Fried's Alameda Research, per the filing.
- DCG is run by Barry Silbert, and Gemini was founded by Cameron and Tyler Winklevoss.
Crypto firms Digital Currency Group and Gemini defrauded more than 230,000 investors out of a collective $1.1 billion, New York state prosecutors said in a lawsuit filed in Manhattan Thursday. They cited a series of missteps, including failure to adequately manage the risk associated with exposure to Sam Bankman-Fried's bankrupt and allegedly fraudulent crypto trading firm.
To perpetrate the alleged fraud, Digital Currency Group and its subsidiaries and affiliates, including Genesis Global Capital and Genesis, lied to investors, created false financial documents and withheld information from creditors, prosecutors alleged.
Genesis was once the flagship of crypto mogul Barry Silbert's empire. An over-the-counter trading desk, prime brokerage and lender, it collected crypto from its customers and lent it out to other parties, reaping profits from the interest it charged its clients. For a time, it was very lucrative, until crypto hedge fund Three Arrows Capital defaulted on its loans and sent much of the crypto world into tumult.
Genesis and DCG have since acknowledged their significant exposure to Three Arrows, or 3AC. But New York prosecutors alleged that Genesis both failed to audit 3AC properly for more than two years, and that when 3AC collapsed, Genesis and its parent company DCG conspired to conceal details of the crisis from investors and the public.
Those investors included Gemini, which was founded by Cameron and Tyler Winklevoss, and its customers. Gemini operated a high-yield program called Gemini Earn, which allowed retail customers to hand over their crypto to Gemini in what was described as a "low-risk" model, prosecutors said. Gemini would then give Genesis that customer crypto for further lending, collecting a slice of Genesis' interest. The program launched in February 2021, while interest rates were still depressed and many investors were hunting for yield.
One of Genesis's biggest counterparties was Sam Bankman-Fried's trading firm Alameda Research. By extension, prosecutors say, that meant that Gemini also had exposure to Alameda — and allegedly knew they did.
New York prosecutors in the same suit accused Gemini of failing to address the "risky" exposure it had to Bankman-Fried's Alameda Research, through its relationship with Genesis. Gemini conducted risk analyses on Genesis' loan book that allegedly showed a major exposure to Alameda, as high as 60% at one unspecified point, and revised Genesis' internal creditworthiness to junk status, according to prosecutors.
But in spite of those internal analyses, prosecutors say that Gemini didn't end its significant exposure to Genesis and Bankman-Fried, despite one Gemini board member comparing "Genesis' financial condition to that of Lehman Brothers before its collapse."
New York prosecutors are seeking to permanently bar Gemini, Genesis, DCG, Silbert and various executives from securities and commodities work within New York, as well as restitution and disgorgement.
"Hardworking New Yorkers and investors around the country lost more than a billion dollars because they were fed blatant lies that their money would be safe and grow if they invested it in Gemini Earn," New York attorney general Letitia James said in a statement. "Instead, Gemini hid the risks of investing with Genesis and Genesis lied to the public about its losses."
It isn't the first time that James has targeted crypto firms. Earlier this year, her office sued Alex Mashinsky, the former CEO of bankrupt crypto exchange Celsius, alleging he defrauded hundreds of thousands of investors. Mashinsky was charged by federal prosecutors with fraud in July and faces prison if convicted.
DCG did not immediately respond to CNBC's request for comment.
"We wholly disagree with the NY AG's decision to also sue Gemini," Gemini said in a statement on X, formerly known as Twitter. "Blaming a victim for being defrauded and lied to makes no sense and we look forward to defending ourselves against this inconsistent position."
The suit "confirms what we've been saying all along — that Gemini, Earn users, and other creditors were the victims of a massive fraud," the company added.
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Crypto Trading & Speculation
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George Osborne’s Help to Buy Scheme gave thousands the footing they needed to get on the property ladder. The flagship housing policy also pumped up house price growth, drove up the profits of housing developers and is now making the Treasury a tidy sum.
But in our special report today, academics spell out exactly why the once hailed house buying policy is now having “appalling” consequences for many of those who used it.
So many were lured into buying homes with cheap money, but there was no thought or foresight for what was to come – the inevitable return of higher interest rates.
Now, as more and more of the Government’s five-year interest-free equity loans expire, young homeowners are facing sky-high rates on not one, but two loans.
Many are trapped in shoddy homes they paid over the odds for and face the very real threat of negative equity. Buyers were lumbered with all the risk while developers took all the rewards.
I’ve written before about how the Tories need to get feet on the property ladder to give the under 40s a reason to vote for them. However, so far their housing policies have done little to address crucial supply issues.
And there was little hope for first-time buyers at this week’s Conservative Party conference, with one former housing minister calling the lack of plan or policy “embarrassing”.
Undoubtedly there will be a soundbite policy scrambled together just in time for the Autumn Statement next month, but ministers will have to do more than throw cash at developers to build more homes.
Britain does not just have trouble getting people on the property ladder, but also getting them off.
Baby boomers are often blamed for the housing crisis, with many living in properties with more bedrooms than they require. But no wonder their reluctance to move out of long-loved family homes, especially once you consider the pitfalls for those who pluck up the courage to move.
Telegraph Money has reported extensively on the retirement homes disaster, with equity-rich downsizers charged extortionate prices for properties that plummet in value due to onerous service costs that continue long after you die.
We reported last week how residents in one retirement home were charged £90 to change a lightbulb. It makes no sense for older homeowners to downsize when there is so much risk and cost involved.
If ministers really wanted to fix the housing crisis, downsizers should be spared stamp duty and provided with decent and reasonably priced housing – and stronger protections.
Axeing stamp duty for downsizers alone would free up family homes for young families – a much more conservative way to tackle the housing crisis.
As it stands, many of us are ripped off getting on the property ladder, and the vultures are waiting for us when we are ready to get off.
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Real Estate & Housing
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Reddit’s unpopular decision to revise its API pricing in a move that’s forcing third-party apps out of business has taken a weird turn. In an AMA hosted today by Reddit co-founder and CEO Steve Huffman, aka u/spez on the internet forum site, the exec doubled down on accusations against the developer behind the well-liked third-party app Apollo, which the company had previously accused of operating inefficiency and not being a good “API” user.
Despite community backlash — which includes a site-wide protest from thousands of communities known as subreddits — Huffman’s AMA confirmed the company has no plans to revise its coming API changes. What’s more, Huffman continued his accusations against Apollo, calling out the developer, Christian Selig’s, “behavior and communications” as being “all over the place” and saying he couldn’t see Reddit working with the developer further.
Selig had been among the first to highlight that Reddit’s new API pricing would effectively make it impossible to continue to operate the Apollo app. He explained that, under the new terms, it would cost him $20 million per year to do so — money the app doesn’t make. This week, Selig announced the app’s last day would be June 30, ahead of the July 1 implementation of the new API pricing.
Other third-party apps are also closing down, including Sync, RIF, and Reddplant, to name a few.
But Huffman seemingly has an ax to grind with Selig in particular, first accusing the developer of extortion, per Selig’s extensive post on the situation between himself and Reddit.
According to Selig’s interpretation of the situation, he raised the question as to why Reddit was choosing to change its API terms to put third-party apps out of business, rather than just buying them out, as the company did with Alien Blue (an older Reddit client that it acquired in 2014.) He said that if Apollo was costing Reddit $20 million per year, Reddit should cut him a check to put an end to the app. The remark doesn’t sound like a serious ask from his telling. If fact, he clarified on the call, “…this is mostly a joke.”
If anything, it comes across as a means of trying to understand why the company would make a move that’s sure to generate ill will among its wider community. (As it has.)
A Reddit representative on a call with Selig, however, first seemingly interpreted his comment as a “threat,” Selig said. But on the call, they cleared up the misunderstanding and the contact apologized. Selig came with receipts — he recorded the call (which is legal where he’s based in Canada.)
But in a subsequent call with moderators, Huffman referred to this conversation as Selig “threatening” Reddit.
That stance hasn’t softened on Reddit’s side, Huffman made clear today.
In the AMA, one user’s question asked Huffman to clarify, “what were you thinking with your attempt to discredit Apollo by claiming that Christian threatened and blackmailed you?”
The response was surprising. Unlike most companies, which try to soften their blows behind corporate PR speak, Huffman answered rather plainly.
“His ‘joke’ is the least of our issues,: the CEO wrote. “His behavior and communications with us has been all over the place—saying one thing to us while saying something completely different externally; recording and leaking a private phone call—to the point where I don’t know how we could do business with him.”
It’s an odd turn of events for Apollo, whose iOS-first and user-friendly design just this week saw it featured during Apple’s Worldwide Developer Conference, ahead of Reddit’s API policy change that will now put it out of business.
Other prominent developers have come out in support of Selig following this debacle.
Halide co-founder Sebastiaan de With tweeted on Thursday calling Selig “one of the nicest guys in our indie app world,” and said Reddit management was lying, slandering, and vilifying him. Others quote tweeted and agreed.
Unless Reddit’s board chooses to intervene, it doesn’t seem that Huffman is concerned much about the fallout from these decisions, site-wide protest or not.
He fended off a number of questions, politely phrased and not, from users upset over the API changes. These ranged from those questioning the model (why not a profit-sharing model like Epic does with Unreal?) to those asking about the compressed timeframe to broader questions about Reddit’s shift to being more about profits than community engagement. (“We’ll continue to be profit-driven until profits arrive, the CEO replied. “Unlike some of the 3P apps, we are not profitable.”)
“Some apps, like Apollo, Reddit is Fun and Sync have decided this [API] pricing doesn’t work for their businesses and will close before pricing goes into effect,” Huffman explained. For the other apps, we will continue talking. We acknowledge that the timeline we gave was tight; we are happy to engage with folks who want to work with us.”
In the comments, though, ReddPlanet’s developer (u/lupeski, aka Tony Lupeski) said “this is a blatant lie,” noting that he had tried multiple times to get in contact with Reddit regarding these changes and had been ignored. Another indie app developer said they had filled out a request for Enterprise API access 3 times and had received no response.
As for the rest of the AMA, there’s little more to report beyond what Reddit had already shared. The company is seemingly unmoved by the community backlash over its API changes and has no intention to delay or reconsider. It will still maintain its carve-out for a handful of accessibility-focused apps, as stated.
Huffman also clarified that while The NYT piece positioned the API pricing changes as a way to limit access to its forums, which have become a training ground for large language models (LLMs), that’s not the only reason behind this move — the company is also spending “tens of millions of dollars” per year to support the third-party app ecosystem, and that needed to be reigned in. (And it’s in “active discussion” with companies using Reddit as training data for their AIs).
The exec additionally noted that access to mature content will be limited via its Data API as of July 5, 2023, as part of a broader effort to provide additional guardrails under a “stricter” regulatory environment, but explicit content was still being allowed.
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Consumer & Retail
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The Internal Revenue Service yesterday announced details for a pilot of its free filing program for the 2024 tax season. People in 13 states "may be eligible to participate in the 2024 Direct File pilot, a new service that will provide taxpayers with the choice to electronically file their federal tax return directly with the IRS for free," the IRS said.
The pilot "will allow the IRS to identify issues and make changes prior to any potential large-scale launch in the future," the agency said. It will assess customer support and technology needs, and help "evaluate the costs, benefits and operational challenges associated with providing a voluntary Direct File option to taxpayers." That includes testing fraud detection and integration with state systems.
Pilot eligibility is for those with "relatively simple returns" because it "is limited by the types of income, tax credits and deductions that the product can initially support." The IRS said it invited all 50 states, but only some are participating at first:
Arizona, California, Massachusetts and New York have decided to work with the IRS to integrate their state taxes into the Direct File pilot for filing season 2024. Taxpayers in nine other states without an income tax—Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming—may also be eligible to participate in the pilot. Washington has also chosen to join the integration effort for the state's application of the Working Families Tax Credit. All states were invited to join the pilot, but not all states were in a position to join the pilot at this time.
To ensure that the program works effectively, Direct File will initially be available only "to a small group of eligible taxpayers in filing season 2024. As the filing season progresses, more and more eligible taxpayers will be able to access the service to file their 2023 tax returns," the IRS said.
The pilot will cover W-2 wage income, Social Security and railroad retirement income, unemployment compensation, interest of $1,500 or less, the Earned Income Tax Credit, the Child Tax Credit, and the Credit for Other Dependents. It will also cover the standard deduction and deductions for student loan interest and educator expenses.
The free Direct File pilot will be available in English and Spanish as "a mobile-friendly, interview-based service that will work as well on a mobile phone as it does on a laptop, tablet or desktop computer."
TurboTax under fire for “free” promises
The IRS pilot is several years in the making. The agency dropped its longstanding promise not to compete against TurboTax-maker Intuit and other private companies in December 2019.
Under the previous Free File deal, the industry agreed to offer free tax services to people with low and moderate incomes. In exchange, the IRS promised not to compete against the private companies. Intuit left the Free File consortium in July 2021, while H&R Block left in 2020.
The Inflation Reduction Act of 2022 gave the IRS $15 million to study the cost of "developing and running a free direct efile tax return system." The IRS delivered its report to Congress in May 2023 and started working on the pilot project for the 2024 tax filing season.
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Personal Finance & Financial Education
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Many of Scotland's ice rinks face closure due to crippling energy bills, a leading industry figure has warned.
Ayr Ice Rink confirmed it would shut its doors permanently in September solely due to unprecedented hikes in the cost of gas and electricity.
Scottish Ice Rink Association president Mike Ferguson said his Forfar business's monthly gas bill is set to rise from £2,000 to £14,500.
He said several Scottish ice rinks were now at "the critical stage."
Mr Ferguson, who owns curling, bowling and ice skating facility Forfar Indoor Sports, said: "Last year was incredibly successful for our elite athletes.
"It's terrific to see medals, but they'll mean absolutely nothing if we can't keep our club curlers curling.
"If we don't have ice rinks we won't have club curlers and we won't have a sport."
Ayr Ice Rink has operated for almost 50 years, but under its new energy deal faces a rise in its daily bill from £419 to £880.
It would have needed to find an extra £150,000 next year to continue operating.
"That just can't be done," its managing director Andrew Kerr told BBC Scotland.
"In a normal year we just break even, but this year coming up, with a hike in energy prices, we just cannot cope with it.
"Prices will come back down, I'm sure, for energy. But they're not going to come down to the level they were."
Mr Kerr said there had been a "huge reaction" on social media to news of the closure."
He said: "People are out there crying their eyes out.
"We have curlers here from aged eight to 80, and they're devastated, as are the skaters and hockey players.
"They're offering donations, but when you have to say to them it's £150,000, it's not £5,000 or £10,000, it hits home what the size of the problem is."
Ice rinks are heavily energy-intensive due to their size and use of refrigeration, lighting, and dehumidifying.
Some, like Lockerbie Ice Rink, have managed to make savings through a combination of reduced energy usage and wage bills, and successful grant applications.
Mr Ferguson said rink operators were doing what they could to cut costs such as switching off lights and having efficient insulation.
He said: "But they only scratch the surface when you're getting £150,000 to £250,000 increases in a six-month season.
"Yes, we can pass on the cost to our customers by increasing their fees, but everyone is feeling the pinch and it's literally unsustainable over the long term."
Scottish Curling said the country had "a fighting chance" of keeping all 22 of the its rinks open in 12 months' time, but at least three are currently under serious threat of closure.
Chief executive Vincent Bryson said: "Even the thought of losing one is catastrophic.
"We're going to have to find a home for the 500 curlers and 30-odd clubs in Ayr but it's not the only place the situation is dire."
He said that three rinks closing in the next year could potentially wipe out 25% of its membership.
He said: "There's no sport that could recover from that.
"Sport has got a great emotional pull for Scotland. So we don't struggle to get people to listen, but turning that into action is the great unknown.
"The conversations we've had with governments at all levels has been positive, but we understand that the government are strapped as well."
Winter Olympics silver medallist curler Scott Andrews said he was devastated at the pending closure of Ayr Ice Rink.
He said: "It's a massive part of the community and it's very much a social sport, so it will be a massive loss.
"I started curling here when I was eight years old and my family all curled here.
"This is where I learned how to curl and if it wasn't for Ayr Ice Rink I would never have got to the Olympics and won that Olympic medal."
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Energy & Natural Resources
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Titan Q2 Results Review - Positives Factored In; Maintain 'Sell': Dolat Capital
Muted margin performance across segments
BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Dolat Capital Report
Titan Company Ltd.’s Q2 FY24 revenues excluding bullion sales were in line with estimate. However, Ebitda and adjusted profit after tax came ahead of our anticipation.
Increase in studded jewellery contribution would help improve Ebitdam, going ahead.
Further, benefits of low cost inventory fade out completely and plain gold jewelry sales increased during Q2 FY24, impacted the margins. Going ahead, the company expects 12-13% steady state margins in the jewelry business (excluding bullion sales).
Though Titan’s Q2 profitability was ahead of our estimate, we have maintained our FY24E/FY25E earnings per share estimates at Rs 42.5/48.4 as we believe that H2 profitability would remain under pressure due to low diamond prices.
We have introduced FY26E at Rs 54.9. Valuing the stock at 58 times FY26E EPS we arrive at a target price of Rs 3,185. Maintain 'Sell'.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
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Stocks Trading & Speculation
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With Congress barreling toward a government shutdown, many Americans are wondering how it could affect them. Here’s a guide to what you can expect.
What is a government shutdown?
A government shutdown happens when Congress doesn’t approve funding for the federal government by the time the new fiscal year starts on October 1. Each year, Congress must pass the 12 appropriation bills that make up the discretionary spending budget and set funding levels for federal agencies.
What happens during a government shutdown?
If lawmakers fail to enact all or some of the appropriation bills, many government operations grind to a halt, resulting in a full or partial government shutdown until Congress acts. However, government functions that are deemed essential will continue.
Each federal agency comes up with a contingency plan that outlines which of its functions will continue during a shutdown and which will stop, as well as how many of its employees will continue working and how many will be furloughed until the shutdown ends.
What it means for you
Because many federal workers are off the job during a government shutdown, many services are stopped or slowed, disturbing the day-to-day life for many Americans.
Notably, Social Security payments to seniors, Americans with disabilities and others would continue to be distributed. The Postal Service would also continue regular service. Some states would use their own funds to keep open certain national parks, like the Grand Canyon.
Here are some examples of how a shutdown could affect you.
What it means for government workers
When a shutdown occurs, millions of federal employees and military service members do not get paid until it ends.
Employees deemed “essential,” such as those in services that protect public safety or national security, keep working. In the past, this included services such as federal law enforcement and air traffic control.
Non-essential employees are furloughed, or temporarily suspended.
Both groups must pull from savings or find other ways to stretch their dollars, not only until the shutdown ends but until back pay arrives. The number of workers affected depends on if the shutdown is full or partial. If some appropriation bills pass on time, those corresponding federal agencies will have approved funding and continue operating as normal, resulting in only a partial shutdown.
During the last government shutdown in 2018-19, an estimated 420,000 federal employees worked without pay and another 380,000 were furloughed. But depending on which agencies are affected, these numbers can be much higher.
Government contractors are even worse off. Unlike federal workers, contractors have no guarantee of getting back pay once the government reopens. Contractors number in the millions and include firms that work for NASA, the Department of Homeland Security, Federal Aviation Administration, and other federal agencies, providing a range of services such as IT or infrastructure repair.
What it means for the economy
On a national scale, government shutdowns can have far-reaching economic consequences, hampering growth and promoting uncertainty, especially if they drag on. Some of these costs include raising the unemployment rate, lowering the growth in gross domestic product (GDP), and raising the cost of borrowing. Each week of a government shutdown could cost the US economy $6 billion and shave GDP growth by 0.1 percentage points in the fourth quarter of 2023, according to estimates by EY.
A shutdown also renders the state of the US economy unclear. In such an event, the Bureau of Labor Statistics stops releasing data, such as key figures on inflation and unemployment, making it challenging for the Federal Reserve and investors to interpret the economy and make decisions – decisions that are especially crucial at the moment as the Fed is at a pivotal point in its campaign to defeat high inflation.
Business as usual across the country is affected too. During the last shutdown, the government paused two major Small Business Administration loan programs, which distribute nearly $200 million per day to small and midsize US businesses. New business also stalls. In 2019, pending company mergers slowed because the Securities and Exchange Commission (SEC) wasn’t fully staffed and initial public offerings were put on pause after the SEC stopped reviewing and approving filings.
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Inflation
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Cars, phones, watches.
It’s easy to put a value on physical objects when we can see their differences and compare their quality. But what about intangible assets that make up the designs of each car, the trademarks behind those watches, or the patents fueling the smartphone wars?
The abstract nature of intellectual property (IP) presents a dual challenge: It can be demanding to safeguard and can be equally intricate to articulate its worth. This affair can pose a significant hurdle for companies looking to leverage patents in their fundraising efforts, primarily as more companies rely on forward-thinking conceptualizations aided by technology.
Recent years have seen increased financial support for companies seeking debt funding and equity fueled mainly by the innovative ideas of startups and tech companies that have established precedence. From 2011 to 2020, 58% of venture capital went to startups with patents or patent applications. Deal sizes for patent startups during this same period were up 40% to 60% than those for nonpatent startups. When considering valuations during patent raises, patent companies raise capital at higher valuations than non-patent-seeking companies. Looking solely at angel round deals, the average annual median is 93% larger.
From human resources to car wash companies, technology is now so prevalent that placing a value on intangible assets no longer seems out of reach. However, AI and other emerging technologies have added gray areas to the world of patent funding, asking investors to open their minds and wallets once again.
Determining patent value
When a company seeks to use patents as collateral for debt, it is common practice to reference the yearly reports published by Richardson Oliver Law Group. Richardson Oliver helps companies make IP decisions and provides average values for a patent or patent family on the brokered market.
The abstract nature of intellectual property presents a dual challenge: It can be demanding to safeguard and can be difficult to articulate its worth.
Alternatively, if the goal is to sell a company to private equity, companies can use the fair market value approach, also called a relief from royalty. The relief-from-royalty number is based on a company’s patent portfolio and details the amount of money a company will not have to pay in patent royalties.
Another option is for companies to collaborate with reputable patent valuation firms when assessing the data integrity of their patents. This option holds particularly true for companies in emerging fields needing more substantial information or historical benchmarks.
When selecting a patent valuation firm, the quality of data the firm can provide should be emphasized. Ideally, companies should seek out firms that rely on publicly accessible data from legal proceedings or publicly available patent transactions. This data should be used to establish a dependable valuation of the patent portfolio tailored to the specific purpose at hand. Companies should exercise caution when encountering patent valuation teams that present excessively optimistic valuations lacking a clear foundation in data.
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Banking & Finance
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A squirrely Sam Bankman-Fried tried to squirm his way out of answering questions during a surprise hearing at his Manhattan federal fraud trial Thursday — as he claimed his trading firm had been “permitted” to “borrow” the $8 billion in FTX user funds he is charged with stealing.
Bankman-Fried, 31, flailed as prosecutor Danielle Sassoon grilled him on the stand after the judge sent jurors home for the day to go over what evidence would be included in the accused crypto crook’s hotly-anticipated Friday morning testimony.
“Listen to the question, and answer the question,” Judge Lewis Kaplan told the fallen crypto king at one point during the bizarre three-hour hearing, reprimanding Bankman-Fried for giving roundabout answers.
“The witness has what I’ll simply call an ‘interesting’ way of responding to questions,” Kaplan quipped later as Bankman-Fried sat wearing a gray suit and a purple tie, with a bottle of Poland Spring water next to him on the stand.
The former crypto golden boy appeared to be distressed throughout the hearing, staring downward, wincing — and frequently telling Sassoon that he would have “phrased” questions differently, and then delivering rambling and long-winded answers.
He responded “I don’t recall” or said that he couldn’t remember certain conversations with either his ex-colleagues or lawyers at least a dozen times.
Thursday’s hearing was partly meant to probe the scope of Bankman-Fried’s planned “advice-of-counsel” defense — which argues that he shouldn’t be held accountable for his alleged crimes because he was just following his lawyers’ advice.
But it also served as a sort of rehearsal for Bankman-Fried’s planned testimony before the jury — and suggested that he may struggle to explain himself under withering cross-examination.
When asked directly whether trading firm Alameda Research’s FTX account was given the unique privilege of amassing a massive negative balance — which ex-company executives testified was used in the scheme to steal customer funds — Bankman-Fried did not answer the question.
“Um, sorry, I….,” he said, before trailing off.
After a beat, Bankman-Fried added, “I’ll make my best guess at answering your question” — but then did not provide a clear explanation.
He responded “I don’t recall” when asked whether he spoke with company executives on an encrypted app about Alameda having a $13 billion debt before FTX’s November 2022 collapse.
“I don’t specifically recall such conversations,” he said.
When asked if he spoke with lawyers about depositing money from FTX users into an account controlled by Alameda, Bankman-Fried responded: “I don’t recall any conversations that were contemporaneous and phrased that way” — and then grabbed the bottle of water next to him and took a swig.
“I wish I had had conversations,” he continued, and then appeared to say that he wished he had been “more informed,” though it was challenging to make out every word of his stilted remarks.
“I’m not sure if other people were involved in conversations,” Bankman-Fried added.
Earlier, he responded “Yes, in many circumstances,” when his defense attorney Mark Cohen asked him whether Alameda was allowed to “borrow” money from FTX deposits.
“Did you believe that you were managing FTX in accordance with its terms of service?” Cohen later asked.
“Yes,” Bankman-Fried answered.
But the California crypto magnate fumbled and provided a word salad answer when Sassoon later asked him a similar question.
“I believe that it gives a fair bit of discretion to how Alameda acts in general… I wouldn’t phrase it that way, but I think the answer to the question I think you are trying to ask is yes.”
“I’m not a lawyer…I’m just giving as best as I can what my memory is,” Bankman-Fried later said by way of explaining his incomplete responses to Sassoon’s questions.
Bankman-Fried has pleaded not guilty to conspiracy and wire fraud charges for allegedly using more than $8 billion in stolen FTX user deposits to fund lavish real estate purchases, political donations and to repay lenders.
His expected testimony comes after jurors heard earlier this month from three of his former FTX associates — including his ex-girlfriend Caroline Ellison — who flipped on him after pleading guilty.
Ellison testified that Bankman-Fried “directed her” to steal billions in FTX customer funds to pay off Alameda’s massive debt, and that the accused fraudster had the final say on both companies’ big decisions.
Bankman-Fried also did not care about following moral codes such as “don’t lie” and “don’t steal” because he felt that he was working for the “greater good” of society, Ellison told jurors.
Another of Bankman-Fried’s former top executives, Nishad Singh, ripped him for “excessively” spending hundreds of millions on FTX endorsement deals with celebrities and sports leagues – while jurors were shown a picture of a grinning Bankman-Fried posing with with Katy Perry, Orlando Bloom and Kate Hudson at the 2022 Super Bowl.
But Bankman-Fried’s lawyers defended FTX’s spending during cross-examination of Singh as crucial for growing the business.
Bankman-Fried faces what would effectively be a life sentence, if convicted.
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Crypto Trading & Speculation
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- Target said it will close nine stores across the country after struggling with crime and safety threats at those locations.
- Target, which has nearly 2,000 stores in the U.S., has been outspoken about organized retail crime at its stores and said theft has driven higher levels of shrink.
- Target is closing locations in New York City, Seattle, San Francisco and Portland.
Target said Tuesday that it will close nine stores in major cities across the country, citing violence, theft and organized retail crime.
The company will close one store in New York City's Harlem neighborhood, two locations in Seattle, three stores in the San Francisco-Oakland area and three more in Portland, Oregon. The discounter said it will shutter the stores for good on Oct. 21.
"We cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance," Target said in a news release.
"We know that our stores serve an important role in their communities, but we can only be successful if the working and shopping environment is safe for all."
Target, which has nearly 2,000 stores in the U.S., has been outspoken about organized retail crime at its stores. It has said theft has driven higher levels of shrink, an industry term used to describe losses from goods that were damaged, misplaced or stolen.
With its announcement Tuesday, Target also stands apart in its decision to both shutter stores and to explicitly blame that decision on retail crime.
When the company reported fiscal second-quarter earnings in mid-May, CEO Brian Cornell said organized retail crime had shot up at its stores. He added shrink overall is expected to reduce Target's full-year profitability by more than $500 million compared to the year-ago period.
When asked if the company plans to close stores because of rising shrink, Cornell stressed Target's reluctance to shutter locations.
"We do not want to close stores. We know how important our stores are. They create local jobs, they generate taxes, they're very important for those local shoppers, and they play a critical role in communities across the country," Cornell said on a call with reporters in May.
"We'll continue to do everything in our power to keep our doors open," he added. "At the same time, we'll be closely monitoring the safety of our team and guests as well as the financial impact to our business as we determine the right path forward at Target."
The retail executive's comments led other companies to speak out on the problem, too, and to advocate for legislative reform. Following the passage of the Inform Act, which requires online marketplaces to disclose the identities of certain high-volume sellers to deter the sale of stolen and counterfeit goods, retailers and trade associations are now pushing for the passage of another bill called the Combating Organized Retail Crime Act.
The bill, which Target said it supports in Tuesday's news release, proposes stiffer penalties for theft offenses and calls for a change in the threshold prosecutors must meet before bringing federal theft cases. It would also provide retailers with a formal venue to exchange information with one another and law enforcement through the proposed Organized Retail Crime Coordination Center.
Since 2022, at least nine states — six so far this year — have passed similar laws to impose harsher penalties for organized retail crime offenses. Behind the sweep of legislation are retailers and trade associations, which are using their collective power to get the bills written and past the finish line.
Store closures, or the threat of them, have been a major factor in retailers convincing lawmakers to get on board, policy experts previously told CNBC.
Target's business has struggled for more than a year with company-specific challenges, including a glut of unsold inventory, backlash to its Pride merchandise collection and a pullback in consumer spending on discretionary items such as apparel and home goods.
Over the past two decades, Target had not mentioned shrink hitting its margins during earnings calls until August 2022, when the company's and other retailers' profits were getting hurt by higher markdowns while trying to unload unwanted merchandise, CNBC previously reported. When inventories rise, shrink tends to increase as well, industry experts told CNBC.
The company previously said its shrink numbers vary widely by location and do not correlate with inventory levels.
Target said Tuesday that it has taken a variety of steps to stop crime at its stores. Those measures include adding locked cases for some merchandise, hiring third-party guard services, training store leaders about how to de-escalate potentially dangerous situations and investing in cyber defense to stop fraud or organized crime.
Yet, Target said at the affected stores, a larger security team and theft-deterrent tools weren't enough.
"Despite our efforts, unfortunately, we continue to face fundamental challenges to operating these stores safely and successfully," Target said in the release.
The company said it will work with employees at the closed stores to give them an opportunity to transfer to another Target location.
It's not clear what actions the company is taking to improve inventory management.
Target announced the store closures on the same day that the National Retail Federation, the industry's major trade association, released its latest National Retail Security Survey. The survey found the effect of theft on retailers' bottom lines is about the same as it has been for years.
Total retail shrink grew to more than $112 billion in 2022, up from $93.9 billion the year before, according to the survey. The metric is calculated using total U.S. retail sales and generally rises as retail sales climb.
When reported as a percentage of sales as is commonly done, average annual shrink increased to 1.57%, up from 1.44% in 2021. The share is largely in line with past years and is considered a normal and healthy level of shrink by industry experts. Generally, retailers plan for about 1% to 2% of shrink each year.
Nordstrom closed its San Francisco flagship store and Nordstrom Rack location in the city this summer after operating there for more than 35 years.
Yet the company cited market dynamics rather than crime. In a message to employees at the time, then-Chief Stores Officer Jamie Nordstrom said changes in downtown San Francisco had hurt "customer foot traffic to our stores and our ability to operate successfully."
A brazen smash-and-grab in August at one of Nordstrom's other locations, a store in Los Angeles, made national headlines.
On an earnings call in late August, the company was asked about the widely circulated video of the crime. CEO Erik Nordstrom described the incident as "disturbing to all of us" and said losses from theft are "at historical highs." But, he added, theft is included in company guidance and not higher than expected.
In a December interview with CNBC, Walmart's CEO Doug McMillon warned that stores will close if shoplifters aren't aggressively prosecuted.
Walmart has also closed some stores, including four in Chicago in April, but didn't blame theft. In a news release at the time, the retailer said it's struggled to make the locations profitable and challenges have intensified. It said the stores "lose tens of millions of dollars a year, and their annual losses nearly doubled in just the last five years."
Walgreens, like Target, specifically pointed to organized retail crime as the reason for shuttering some stores in San Francisco in 2021.
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Consumer & Retail
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Hong Kong's Journey Towards Digital Finance Innovation
In the world of finance, cryptocurrencies have been making waves, disrupting traditional financial systems, and creating a new digital economy. One city that's embracing this revolution is Hong Kong. Known for its vibrant economy and status as a global financial hub, Hong Kong is now setting its sights on becoming a leading player in the cryptocurrency market.
A New Era of Crypto Trading in Hong Kong
In a significant development, Hong Kong is set to legalize cryptocurrency trading for its citizens. This groundbreaking move will take effect from June 1st. This decision marks a significant step towards financial inclusivity and freedom, demonstrating the city's commitment to embracing the potential of digital currencies and blockchain technology.
The legalization of cryptocurrency trading is expected to open up new opportunities for Hong Kong's citizens. It will allow them to participate in the global digital economy, providing them with access to new forms of investment and wealth creation. Moreover, it will also stimulate innovation and entrepreneurship in the city's burgeoning fintech sector.
Hong Kong vs. Mainland China: A Tale of Two Policies
Interestingly, Hong Kong's decision to embrace cryptocurrencies stands in stark contrast to the policies of its mainland counterpart, China. While China has been cracking down on cryptocurrencies, Hong Kong is moving in the opposite direction, seeking to legalize crypto trading.
This divergence in policy is noteworthy. It highlights Hong Kong's willingness to embrace new technologies and its commitment to maintaining its status as a leading global financial hub. Moreover, it positions Hong Kong as a potential crypto haven in Asia, attracting investors and businesses interested in digital currencies.
A Conducive Environment for Crypto Firms
But Hong Kong's crypto revolution doesn't stop at legalizing trading. The city is also amending its finance law to incorporate cryptocurrency firms. This move is part of a broader strategy to regulate and integrate digital currencies into the city's financial ecosystem.
By incorporating crypto firms into its finance law, Hong Kong is creating a conducive environment for these businesses to thrive. It's a clear sign that the city is not just open to cryptocurrencies, but is also committed to supporting the growth and development of the crypto industry.
Conclusion: A Model for the Future?
Hong Kong's progressive stance on cryptocurrencies is a testament to its commitment to financial innovation and inclusivity. By legalizing crypto trading and amending its finance law to accommodate crypto firms, the city is positioning itself as a leading crypto hub in Asia.
As the world continues to embrace digital currencies, Hong Kong's approach could serve as a model for other jurisdictions. It demonstrates how cities can integrate cryptocurrencies into their financial ecosystems, stimulate innovation, and provide their citizens with new opportunities in the digital economy.
In conclusion, Hong Kong's crypto revolution is a fascinating development to watch. It's a bold step into the future of finance, one that could have far-reaching implications for the city and the wider world.
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Crypto Trading & Speculation
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Labour’s policy of not granting licenses for viable oil and gas fields in the North Sea would mean the UK “would be reliant on countries like Russia” for energy, Michael Gove has said.
The levelling up secretary said that “the Just Stop Oil policy”, which he also called “the Labour policy”, is that “we get rid of British jobs, and we give them to Russian workers”.
He told Sky News that this approach “is in no way either right economically or right environmentally”.
It comes after energy security and net zero secretary Grant Shapps vowed last week to “max out” North Sea oil and gas.
Mr Shapps told the Financial Times: “What Labour foolishly and irresponsibly want to do is pursue a policy of self-harm by not taking that oil and gas but buying it from abroad”.
He insisted the government’s approach was compatible with Britain’s pledge to reach net zero carbon emissions by 2050.
But the interventions from Mr Shapps and Mr Gove come as ministers look at potentially watering down measures intended to help the UK reach Net Zero emissions by 2050.
Over the weekend, Mr Gove called for the relaxation of some environmental measures as he warned against treating climate change like a “religious crusade”.
In his own department, Mr Gove admitted the government is “asking too much too quickly” of landlords. Under current proposals, they will be banned from renting out their homes unless they pay for green measures, such as insulation and heat pumps, to meet a new minimum energy efficiency target by 2028.
The broader focus on environmental policy across government follows the Conservative party’s by-election win in Uxbridge, which has widely been attributed to the Labour mayor’s ULEZ plans.
Asked about London Mayor Sadiq Khan’s ULEZ plans this morning, Mr Gove insisted that environmental change should not “penalise people”.
He said: “The ULEZ expansion that the Labour mayor Sadiq Khan has contemplated is about asking hard working people to pay a significant amount more during a cost of living crisis.
“My view is that the way in which you build support for the environmental change we need is not by penalising people in this way.
“It’s by showing leadership across the board and that means everything from investing in nature recovery to making sure the progress that we’re making towards electric vehicles… and more broadly towards decarbonisation is properly directed.”
However, he said a thoughtful approach will also “take note of other economic factors”.
“It’s absolutely vital that we take steps to advance and improve our environment,” Mr Gove added.
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Energy & Natural Resources
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A former Conservative minister has said that he is “very tempted” to back the Labour Party at the next general election.
Zac Goldsmith, a former minister and Boris Johnson ally, said he could do so because his own party does not have“a clear answer” to climate change.
Lord Goldsmith added that Sir Keir Starmer must emphasise his “commitment” to reaching net zero carbon emissions, saying that Labour doubling-down on green issues could earn his support.
“The simple truth is there is no pathway to net zero and there’s no solution to climate change that does not involve nature, massive efforts to protect and restore the natural world”, he told the BBC.
“And at the moment, I’m not hearing any of that from the Labour Party,” said Goldsmith.
He added: “If I do, if there’s a real commitment — the kind of commitment that we saw when Boris Johnson was the leader — then I’d be very tempted to throw my weight behind that party and support them in any way I could.”
Lord Goldsmith, a Conservative peer, until recently served in Rishi Sunak’s government as international environment minister — but he resigned shortly after he was accused of being one of the Boris Johnson allies who undermined MPs’ privileges committee inquiry into partygate.
But Lord Goldsmith insisted in his resignation letter that he had quit because of “apathy” over climate change and the environment as he accused the prime minister of being “simply uninterested” in the issues.
“It’s great that the government is saying that they’re committed to £11.6bn, but mathematically, it is impossible for us to meet that target. Unless the Treasury intervenes, unless the prime minister intervenes, it’s simply impossible.
He added: “If you look at the trajectory of expenditure, in order to fulfil that promise the first year of the next government – which may or may not be this government, it might be the Labour Party – will have to spend over 80 per cent of all of its bilateral aid on climate finance. And that it obviously is not going to happen.”
Mr Goldsmith said Labour still had a “blind spot” on the natural environment. “When the Labour party thinks environment, when it talks environment, it’s think carbon, taxation and regulation and all the things that go with that.”
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Renewable Energy
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It is a debate sure to ruffle feathers, but anything beyond the Watford Gap really should be classed as the north of England, a study suggests.
This is the critical line at which high street bakery Greggs, the beacon of northernness, becomes more popular than the southerners' sandwich shop of choice, Pret A Manger, an academic study has worked out using artificial intelligence.
If the national consumption of steak bakes versus houmous-filled wraps and smashed avocado on toast were not convincing enough, the researchers also looked at the distribution of Morrisons and Waitrose supermarkets across England.
This too put the north-south divide within two miles of the Watford Gap.
Both calculations agree that Birmingham, Coventry and Leicester are technically in the north of England. But bizarrely, the Pret and Greggs dividing line shows that Cornwall is northern.
This is the case because there are no Prets in the county, and because Cornwall is grudgingly home to a couple of Greggs, despite the 'pasty wars' which saw some locals describe the bakery as 'Satan's franchise' because its pastry goods are not made to a traditional recipe.
The analysis by researchers at Sheffield Hallam University, carried out using machine-learning and not yet peer-reviewed by other academics, but published online in April, was brought to the attention of a wider audience at Cheltenham Science Festival.
Sophie MacLean referenced it in her talk on how maths is relevant to everyday questions.
The mathematician told the audience: 'Really there is only one way to judge what's north and what's south and that is by looking at the distribution of Pret and Greggs.
'You could imagine the single Pret in Newcastle surrounded by a swarm of Greggs.
'In London, they say you're never more than six metres from a rat – or a Pret.'
Dr Robin Smith, the physicist who led the study from Sheffield Hallam, adapting the machine-learning normally used to look at nuclear reactions, said: 'The food we eat is a very good indicator of whether someone is northern or southern.
'Greggs is very popular in the north, where people do seem to prefer a steak bake.
'We are fascinated by the north-south divide, so it is good to have a way of working out where it starts.
'The north really may start at the Watford Gap, just as people say it does, even though, as someone from Birmingham, I wouldn't think of myself as being from the north of England.
'Since Greggs produced the vegan sausage roll, however, it has become more popular in the south, so this might not be a marker of northernness for that much longer.'
The north-south divide is believed to date back to 1069, when William the Conqueror charged north to try to control an unruly population.
Greggs has become a symbol of the north because its first bakery was opened in Newcastle in 1951, while Pret first opened in Hampstead in 1984.
The 'tongue-in-cheek' England-only research, which was carried out during the researchers' evenings and weekends over the course of a month, was done by searching for Greggs and Pret stores, Morrisons and Waitrose supermarkets across the country and converting their locations into latitudinal and longitudinal coordinates.
Researchers used a machine-learning statistical method to try to work out the line in the country dividing the most Greggs from Prets.
Then they used an artificial neural network, to assign a value to each area of the country based on its number of these outlets.
This showed the dividing line in the country where the probability of finding a Greggs overtakes the probability of finding a Pret - oddly enough it divides Norfolk, with King's Lynn classed as northern, while Norwich is still in the south.
The researchers looked at the supermarkets also, because Pret is so concentrated in London that a 'London effect' may skew the figures, and the use of Pret and Greggs produced the 'Cornwall anomaly'.
Both measures put the diagonal north-south divide as roughly cutting across Peterborough.
Oxford, Cambridge and Milton Keynes all end up in the south.
The north-south line calculated by looking at Pret and Greggs closely matches the north-south divide based on average gross household income, which was also analysed by the researchers, because incomes in the north are generally lower than in the south.
The line from looking at Morrisons and Waitrose closely matches the north-south divide called the 'Dorling line' which is based on factors including house prices, employment level and life expectancy.
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Consumer & Retail
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Donald Trump's lawyer Christopher Kise is making an "ass" out of himself on a daily basis in his defense of Trump, Michael Cohen has said.
Trump's former lawyer reacted after a financial watchdog in the ex-president's civil fraud trial informed the court about $40 million in three previously unreported cash transfers that had not been properly disclosed.
Judge Arthur Engoron is determining how much the Republican will pay in damages after he issued a partial summary judgment in September in a trial filed by New York Attorney General Letitia James in 2022. The state has alleged that Trump and the Trump Organization had committed fraud. Engoron ruled that Trump grossly inflated the value of his assets to obtain more favorable terms from lenders and insurers. Trump has denied all wrongdoing.
The defendants in the case were required to report any cash transfers amounting to more than $5 million. But Barbara Jones, a retired federal judge whom Engoron appointed to monitor the financial activity at the Trump Organization, said her team had in a review identified three cash transfers between January and October exceeding $5 million, totaling approximately $40 million.
Newsweek contacted the Trump Organization and Kise by email to comment on this story.
In response to the cash transfer disclosures, Kise referred to Jones' previous reports and told CNBC in an email Wednesday: "As before, the report confirms the defendants continue to cooperate with the monitor and remain in compliance with the court order."
"Also as before, the report contains no mention of suspicious activity or suspected or actual fraud, because none exists."
Meanwhile, Cohen, a witness in the civil fraud case and a critic of the 2024 Republican frontrunner, told the MeidasTouch news network that Trump's lead attorney Kise was acting "desperately" in defense of his client.
He said: "You see the comments from Chris Kise. For a guy who had a decent reputation as a lawyer is he making an ass out of himself on a daily basis trying, desperately trying, and I know because I've been there, you desperately try to bring back what Donald has said or what Donald has done into the realm of 'this is not illegal this is exactly what we were required to do.'
"No, you were not supposed to transfer any money greater than $5 million without notifying special master Jones. They did, now they're going to be held accountable for that as well. Let's all see, fingers crossed."
The transactions the Trump Organization failed to disclose properly included a $29 million transfer to Trump, which Jones said was used for tax payments. The other transfers were used for insurance premiums, as well as a $5.5 million payment related to the civil suit brought against Trump by E. Jean Carroll, the report said.
Jones said that the Trump Organization acknowledged oversight and continues to cooperate and is generally in compliance with the court orders.
"Defendants have agreed to enhanced monitoring given the matters described in this report," Jones wrote in her concluding paragraph. "Defendants continue to cooperate with me and are generally in compliance with the Court's orders, and have committed to ensure that all required information, including tax information and cash transfers, are promptly disclosed to the [court]."
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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About the writer
Kate Plummer is a Newsweek reporter based in London, U.K. Her focus is on U.S. politics and national affairs, and she is particularly interested in the impact of social policy decisions on people as well as the finances of political campaigns, corruption, foreign policy, democratic processes and more. Prior to joining Newsweek, she covered U.K. politics extensively. Kate joined Newsweek in 2023 from The Independent and has also been published in multiple publications including The Times and the Daily Mail. She has a B.A. in History from the University of Oxford and an M.A. in Magazine Journalism from City, University of London.
Languages: English.
You can get in touch with Kate by emailing k.plummer@newsweek.com, or by following her on X at @kateeplummer.
Kate Plummer is a Newsweek reporter based in London, U.K. Her focus is on U.S. politics and national affairs, and... Read more
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Banking & Finance
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Net Direct Tax Collection Rises 22% To Over Rs 9.57 Lakh Crore; Touches 52.5% Of Estimates
The net collections have reached 52.5% of the full-year budget estimates (BE) of Rs 18.23 lakh crore.
The net direct tax collection increased by 21.82% to over Rs 9.57 lakh crore till Oct. 9, helped by good inflow from corporates and individuals, the Finance Ministry said on Tuesday.
The net collections have reached 52.5% of the full-year budget estimates (BE) of Rs 18.23 lakh crore.
The provisional figures of Direct Tax collections up to Oct. 9, 2023, continue to register steady growth, the statement said.
With regard to gross direct tax collections, the statement said, it stood at Rs 11.07 lakh crore, which is 17.95% higher than the gross collections for the comparable period of last year.
So far, as the growth rate for Corporate Income Tax and Personal Income Tax in terms of gross revenue collections is concerned, the growth rate for CIT is 7.30% while that for PIT is 29.53% (PIT only); 29.08% (PIT including STT).
After adjustment of refunds, the net growth in CIT collections is 12.39% and that in PIT collections is 32.51% (PIT only)/ 31.85% (PIT including STT).
Refunds amounting to Rs 1.50 lakh crore have been issued from April 2023 to Oct. 9, 2023.
The 2023-24 budget has pegged the direct tax collection at a little over Rs 18.23 lakh crore, 9.75% higher than Rs 16.61 lakh crore mopped up last fiscal.
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Inflation
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For older Americans, living off the interest and returns of your retirement account is how retirement is structured. The goal is that by the time you hit your late 60s you will ideally have enough saved up to coast indefinitely. For younger Americans, the goal is to build up enough of a nest egg to retire early. But building up that kind of nest egg isn’t easy. And when thinking about how much money you will need to get there, you may be asking: Is $2 million enough? And, can you live off the returns of a $2 million account? The answer is yes, if you’re smart about it. Here’s what you need to know.
A financial expert could help you create a financial plan for your retirement needs and goals.
How to Live Off Interest
The first thing to understand is how you live off interest. When we talk about living off of interest payments, we’re referring to what’s called “passive income.” This means that your various assets generate enough money on their own to provide your monthly income. You don’t have supplemental income or other work (beyond portfolio management) that adds to either your portfolio or your monthly budget.
Ideally, you also don’t draw down on the core principal. You can do so, of course. For example, someone who took $75,000 per year out of a $2 million account could coast for more than 25 years before the account ran dry. But when we talk about living on the interest, we’re trying to decide if you can live indefinitely. This means that you don’t touch the principal, only the interest and returns.
Step One: How Much Money Do You need?
To figure out if you can live off the interest of an account, the first step is understanding your own expenses. To put it another way, first you need to know how much money you’ll need each month. Then you can figure out what kind of savings can get you there.
Living off the interest of your savings is an excellent goal, and many younger Americans increasingly target it. The best way to start on this project is to focus on debt. Nothing will erode your ability to out-earn your expenses faster than the fixed monthly overhead of a credit card, student loans or other forms of interest-bearing loans. Pay off those as quickly as you can and this project will be much easier.
When you do this math, it’s important to balance your needs and wants. First, how much money do you absolutely need per month? Do you have fixed expenses, like medical costs or other bills that can’t go away? Do you support anyone?
Then, take a realistic look at your lifestyle. What you want to do here is balance two competing needs: On the one hand, the more lavish your lifestyle the higher your bills, and the more money you’ll need before a portfolio can generate those returns. On the other hand, the point here is to be happy. Set a target lifestyle that lets you have the things you want in life, otherwise you’ll be both more miserable and more likely to blow your budget.
Take a whole-picture view of your finances, and be realistic about what you want and need.
Social Security provides a stable source of income for elderly Americans and is a fantastic supplement to just about any retirement plan. The average retiree collects about $1,650 per month from this program. We will not include it in this article, since it skews our answer of whether anyone can live on just $2 million in savings. But if you’re looking toward retirement, definitely don’t forget to include that income in your budget.
Can $2 Million Get This Done?
If you have $2 million saved up, what kind of budget can you live on? The answer to this question depends entirely on how you have this money invested.
Investment options for your money range from something as basic as a savings account to options like stocks, bonds and other assets. The key question is reliability and security. The more money an investment returns, the greater the risk of loss as well or at least volatility. If you’re looking to live off the interest of an account you need a balance:
The investment needs to be secure enough to minimize your risk of loss, otherwise you’ll be left without the money you need to live;
The investment needs to be relatively stable, so that you can generally know what to expect each year or over time;
The investment also needs grow enough to generate real income, otherwise you won’t have any meaningful returns off of which to live.
While there are a lot of different options out there, here are four of the best choices for stable, long-term income investing:
High-Yield Savings Account, 0.60%: $12,000 Income per year. A high-yield savings account is literally just a savings account at the bank, but since you’ve deposited a lot of money they increase your interest rate. While numbers vary, on average you can expect to find interest rates around 0.60 percent. This isn’t a great option for generating income, but it’s about as rock-solid as you can get in terms of reliability.
One-Year Treasury Bills, 1.72%: $34,000 Income per year. Government bonds and bills offer a wide variety of options. Their interest rates change based on monetary policy decisions, but at time of writing a 12-month Treasury Bill offered 1.72% in interest. This is the safest place in the world for your money, although the returns tend to be low and that interest rate can change.
Certificates of Deposit, 1.2%: $24,000 per year. When you buy a certificate of deposit, the bank holds your money for a defined period, meaning you can’t withdraw it, but in return they pay you an elevated interest rate. With a good bank you should be able to get rates around 1.2%. Like a savings account this is about as good as you can get in terms of reliability, although even the elevated rate of a CD is fairly low and you can’t access your principal if there was an emergency.
S&P 500 Index Funds, 10%: $200,000 per year. Over the past several decades, mutual funds and ETFs indexed to the S&P 500 have returned an average of between 10% and 14% per year. Unlike the other options we’ve considered here, index funds come with real risk. With a bank product (like a savings account or a CD) or Treasury debt, you get an extremely high degree of confidence in both your return and your principal. The stock market is much less predictable. It fluctuates, with some years dramatically exceeding the average and other years posting a loss. Still, an index fund is also the most stable higher-yield option we can recommend.
Why You Probably Can Live Off $2 Million
Some particularly budget-conscious households might be able to live off the return of Treasury debt at $34,000 per year. Though this is a small amount of money relative to your likely future needs. And even if you can pay your bills, it will almost certainly leave no room for error.
An index fund, however, could offer you an alternative to do this. The good news about an index fund is the simple numbers involved. At $200,000 per year in average returns, this is more than enough for all but the highest spenders to live comfortably. You can collect your returns, pay your capital gains taxes and have plenty left over for a comfortable lifestyle.
The bad news about an index fund is the variability. Over time major indices like the S&P 500 return to their averages. In any given year, though, returns will vary. For example, between 2012 and 2022 alone the S&P 500 posted annual returns of 29.6% (2013), -6.24% (2018) and 26.89% (2021). In between returns of nearly triple the average, the market also spent a year losing almost an entire year’s average gains.
What this means is that over time the markets can be reliable enough to count on, but you still need to plan ahead. If you want to live off an index fund, you cannot live paycheck to paycheck. Your budget has to include setting aside cash in one of the safe options like a certificate of deposit or Treasury debt. That safety net needs to be large enough to let you live for a year or more of weak returns, and even to replace capital that your account lost if need be.
With $2 million in hand, that is an entirely achievable goal. For example, you could easily set a household budget of $100,000 per year (again a very comfortable amount of money). You could take the other half of your annual returns and use them to pay taxes and build up this preventative war chest. Once this bank of solid savings has several hundred thousand dollars in it, enough to compensate for multiple years of lost earnings, you can reduce your contributions or begin rolling any excess returns back into your index fund.
Bottom Line
Can you live off of $2 million in assets? The answer is yes, if you manage your investment portfolio smartly. One common option is to invest $2 million in an index fund. But you will still need to make absolutely sure that you have a rainy day fund since the market can be reliable over decades but fickle over years.
Tips to Help You Save for Retirement
According to the Federal Reserve, 60% of those with self-directed retirement accounts are not confident about their investment decisions. If you’re one of them, why not hire a financial advisor? SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Counting on Social Security benefits alone likely won’t provide full support for your current lifestyle. But, benefits can definitely help with your living expenses in retirement. SmartAsset’s Social Security calculator will help you estimate how much of a benefit you can expect.
And, if you want to figure out whether you are saving enough for retirement, SmartAsset’s free retirement calculator can help you determine how much you will need.
Photo credit: ©iStock.com/IPGGutenbergUKLtd, ©iStock.com/AlexRaths, ©iStock.com/Drazen_
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Personal Finance & Financial Education
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The Tata Premium? Tata Tech IPO 20% Costlier Than Stake Sale A Month Ago
Tata Motors is also offloading fewer stock in the IPO than previously planned.
Tata Technologies Ltd. wants you to pay up to Rs 500 for a share that was sold for Rs 400 barely a month ago. what gives?
The of Tata Motors Ltd.'s engineering, research & development subsidiary—a first from the Tata stable in nearly two decades—is a pure offer for sale of 6.08 crore shares in a price band of Rs 475–500 apiece. The promoter and investors Alpha TC Holdings Pte. and Tata Capital Growth Fund I are offloading 11.41%, 2.40% and 1.20% stakes respectively.
At the upper end of the price band, the Pune-based company will end up raising Rs 3,042.51 crore at a post-issue implied market capitalisation of Rs 20,283 crore.
But exactly a month ago, Tata Motors 9.99% of its stake in Tata Technologies to TPG Rise Climate SF Pte and Ratan Tata Endowment Foundation at Rs 401.8 apiece to raise as much Rs 1,613.7 crore. The transaction, which saw as many as 4.01 crore shares change hands, pegged Tata Technologies' valuation at Rs 16,300 crore or around $2 billion.
Essentially, TPG Rise, which interestingly is also an investor in Tata Motors' electric mobility unit, bagged Tata Technologies shares at a 20% discount one month before the IPO.
Tata Motors is also offloading fewer stock in the IPO than —from 8.1 crore shares equivalent to 20% stake as mentioned in the draft red herring prospectus to 4.62 crore shares equivalent to 11.41% stake as mentioned in the RHP.
All of this beggars a question: Is demand a concern for the IPO, so much so that an outside investor had to be brought in barely a month before the offering?
“I think the transaction was between a willing buyer and a willing seller," Warren Harris, chief executive officer of Tata Technologies, said during a media interaction on Thursday. "In terms of the IPO, I don't think it (the TPG deal) has any influence on the plans that we've had for an extended period."
A detailed questionnaire was sent to Tata Technologies on the pricing strategy for the IPO. This story will be updated as and when the company responds.
The Tata Technologies stock—despite the implied premium—will still be cheapest among peers upon listing.
Considering the IPO price band of Rs 475–500 and diluted earnings per share of Rs 15.37, Tata Technologies enjoyed a price-to-earnings ratio of 32.5–30.8 times in the fiscal ended March 31. Rival KPIT Technologies Ltd. is the priciest stock in the Indian ER&D space with a P/E ratio of 80.31, followed by Bombay House's own Tata Elxsi Ltd. at 61.55 and L&T Technology Services Ltd. at 37.47.
In the six months ended Sept. 30, Tata Technologies clocked a revenue growth of 34% to Rs 2,526.7 crore at an operational profitability of 18.6%. In comparison, KPIT earned Rs 2,296.7 crore over the same time period with a higher margin of 20.3%.
The top lines of LTTS and Tata Elxsi came in at Rs 4,687.9 crore and Rs 1,731.9 crore respectively with an operational profitability of 19.8% and 29.7%.
Harris is unperturbed by the competition, not even from in-house rivals Tata Consultancy Services Ltd. and Tata Elxsi. He rejected any risk of cannibalisation within the salt-to-software conglomerate.
"Our value proposition represents the difference that matters to the overall market," the CEO said. "We are going to be focused upon exploiting the opportunities that affords us."
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Stocks Trading & Speculation
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Higher interest rates are lifting the fortunes of the nation’s biggest banks. They aren’t doing the same for the banks’ customers.
Their scale allows them to leverage those rates by charging more for loans while holding down how much more they pay for deposits when compared to smaller rivals.
These advantages show up in a key profitability metric known as net interest income, which measures the difference between what banks make on their loans and pay for their deposits.
That number was up by sizable amounts at all three banks when compared to the same period a year ago. Together the lenders pulled in a record $50 billion, 18% more than the same period last year. JPMorgan and Wells Fargo even lifted their guidance for how much net interest income they would earn for the full year.
Yet there were also clear signs that some of their borrowers are starting to struggle. JPMorgan, Citigroup, and Wells Fargo all increased the amount of loans they wrote off as losses. The combined charge-offs at those three banks totaled $3.98 billion, up 31% from the previous quarter and 105% from the same period a year ago.
The total was the highest amount collectively for the three lenders since the early days of the pandemic, in the second quarter of 2020.
At Citigroup, CEO Jane Fraser warned that US consumers were cutting back. “Continued deceleration in spending indicates an increasingly cautious consumer,” she said in a release.
Affluent customers, she added, are accounting for almost all of the spending growth and weakness is showing among those with lower credit scores. Citi expects its credit card losses to reach pre-COVID levels by the end of the year.
Wells Fargo CEO Charlie Scharf said even as the economy remains resilient “we are seeing the impact of the slowing economy with loan balances declining and charge-offs continuing to deteriorate modestly.”
Wells Fargo had charge-offs of $850 million, $622 million from consumer loans. The bank expects its net interest income to fall 3% from the third quarter to the fourth.
"Where Wells Fargo sees weaknesses," according to CFO Mike Santomassimo, is in commercial real estate, and "I think we will see some loss pickup in that portfolio over time."
JPMorgan CEO Jamie Dimon struck a more somber tone. He said consumers and businesses “generally remain healthy” but consumers are spending down their excess cash buffers at a time when inflation risks remain elevated, increasing the possibility that interest rates could go even higher.
Wars in Ukraine and Israel, he added, could also impact energy, food markets, global trade, and geopolitical relationships.
"This may be the most dangerous time the world has seen in decades," he said.
He admitted that the bank has been “over-earning on both net interest income and below normal credit costs, both of which will normalize over time.” He told reporters there is a “big debate” within the bank about when that normalization will happen.
“I personally think it will happen a little sooner than Jeremy,” he said, referring to his CFO.
Dimon, S&P Global Market Intelligence director for financial institutions research Nathan Stovall told Yahoo Finance on Friday, was “trying to throw out some caution.”
The bank, he added, knows credit costs are going to go up. “They are trying to prepare the Street that you could see tougher times ahead.”
One regional bank, PNC (PNC), demonstrated the problems that smaller lenders have navigating this period of higher rates. Its profits and revenue fell from a year ago, as did its net interest income. It expects net interest income to fall again in the fourth quarter when compared to the third.
The Pittsburgh bank said it would reduce its staff by roughly 4%, saving $325 million. Several other regional banks, including Truist (TFC), have also eliminated jobs in recent months as they adjust to more uncertain economic conditions.
PNC’s stock fell 3% Friday while Citigroup's stock sold off slightly in the later part of the day. JPMorgan and Wells Fargo both rose.
"The inflection point," PNC CEO William Demchak said in response to a question about whether PNC's net interest income had reached a trough, "I think is entirely dependent on what happens with the Fed in the coming year."
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Interest Rates
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President Joe Biden is set to sign into law a new bill that the White House says will save lives for Americans in need of an organ transplant.
Biden on Friday will sign a bipartisan piece of legislation that will reform the organ transplant system, the Organ Procurement and Transplantation Network, and waiting process as more than 100,000 people await a transplant. The bill passed the House and Senate on a bipartisan basis in July.
“Everybody knows the system has been broken for years with heartbreaking consequences. Now with the president’s signature, we are taking significant steps to improve it,” White House press secretary Karine Jean-Pierre said Friday.
The law, Jean-Pierre said, “will break up the current monopoly system harnessing competition to allow HHS (the Department of Health and Human Services) to contract with the best entities to provide a more efficient system for the people it serves.”
It also eliminates the funding cap “to allow additional resources to modernize the system,” she said.
The bill, she added, is expected to boost transparency and accountability for those in need of an organ transplant.
The system has only ever been managed by the nonprofit United Network for Organ Sharing, which has drawn criticism for its handling of organs, long waitlists for transplants and the number of deaths among people waiting: about 6,000 per year. More than 100,000 people in the United States are now waiting for an organ transplant.
A report released last year by the Senate Finance Committee found 70 deaths from 2010 to 2020 due to system failures within OPTN, as well as significant opportunities for improvement in how the nation manages organ transplants. “From the top down, the U.S. transplant network is not working, putting Americans’ lives at risk,” the report said.
Part of Biden’s 2024 budget proposal sought increased funding for organ procurement and transplantation – a total of $67 million – and requests that Congress update decades-old rules around appropriations and contracts for organ transplants in order to increase competition.
CNN’s Nadia Kounang contributed to this report.
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Nonprofit, Charities, & Fundraising
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SEC Says WeWork Options Plot Failed On Botched Press Release
The US SEC accused WeWork owner of a botched attempt to profit by manipulating the share price and using client funds.
(Bloomberg) -- The US Securities and Exchange Commission accused a strip mall owner of a botched attempt to profit by manipulating the price of WeWork Inc. shares and using client funds to pay for his lavish lifestyle.
The real estate investor, Jonathan Larmore, was behind an entity called Cole Capital that made an offer to buy WeWork stock at a large premium earlier this month, in the days before the coworking company filed Chapter 11 bankruptcy. The move briefly sent the shares soaring, according to the SEC complaint filed in Arizona.
Larmore had previously acquired call option contracts on WeWork stock, meaning he stood to make “hundreds of thousands to millions of dollars,” according to the SEC, but he allegedly mistimed the press release.
“His options expired just over an hour before the WeWork stock price spiked as a result of his manipulative conduct,” the complaint said.
Larmore didn’t immediately comment. A representative for WeWork declined to comment.
In the same complaint, the SEC is alleging that, by at least 2017, the real estate investor started misappropriating client funds from his firm, Arciterra Cos. Beginning in 2006, Larmore raised roughly $45 million from more than 1,000 investors to bet on real estate, according to the complaint, issuing secured notes that promised more than 8% in annual interest.
Larmore’s story took a bizarre turn in April of this year, the SEC said, with Larmore firing his employees in Phoenix and shuttering its office. Around that time, he emailed a large group of people with an offer to sell his personal property, including cars, boats and jewelry. He also wanted to sell real estate assets held in Arciterra’s funds. At some point in time, the business’s holdings were worth about $570 million, according to recent testimony from a company executive in a separate case.
Larmore told acquaintances he wanted “to shed the baggage of my past and start fresh,” according to the complaint.
The SEC complaint isn’t the only lawsuit Larmore is facing. In May, a group of investors filed suit against Larmore in Illinois, alleging that he used client funds to pay for a Gulfstream G400, a yacht and a lavish party for his dog, Spike. The plaintiffs withdrew that lawsuit in October, although an attorney for the plaintiffs has said that he planned to refile in Arizona.
Earlier this month, Larmore called those allegations baseless.
--With assistance from Austin Weinstein.
©2023 Bloomberg L.P.
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Stocks Trading & Speculation
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After two years of surging prices, economists still can’t agree on what has caused the world’s worst inflation crisis in decades.
While the usual culprits cited by economists include pandemic-era supply chain bottlenecks, the war in Ukraine and various US economic policies, others say it’s due to “greedflation,” the idea that companies use higher inflation rates as an excuse to jack up prices and grow their margins.
However, according to preliminary findings in a New York Federal Reserve survey, there might be something else at play.
The survey of 700 businesses across New York, Atlanta and Cleveland found that strength of customer demand outranked all other factors that companies weigh when setting prices, including steady profit margins and overall inflation.
That means a business can essentially set prices as high as it wants, as long as they aren’t so high that they drive away the customer base. In other words, it’s Econ 101: Good, old-fashioned supply and demand.
More than 82% of businesses surveyed said demand factored into their pricing decisions, while only 52% of businesses said they take the overall rate of inflation into account when setting prices.
Are customers too willing to pay higher prices?
Customers have become trained to tolerate price hikes, said John Zheng, a professor of marketing at the Wharton School at the University of Pennsylvania.
“As a consumer during inflation, you know the costs for companies are increasing, so, therefore, you become more receptive to a higher price,” he said.
Approval of price increases could fuel even higher pricing in the future — a cycle that can be hard to break, said Zheng.
Mr. Mac’s mac and cheese restaurant in Manchester, New Hampshire tried boosting prices a little at a time to keep up with inflation in 2021, but it wasn’t enough to cover the cost increases to the business, vice president of operations Mark Murphy told CNN. Fearing customer backlash, the restaurant accepted smaller margins instead of pricing out their diners.
When the business finally hiked prices, Murphy said the decision was “painful.”
“We were looking at our sales and our orders daily, and we were checking every review to see what people were saying,” Murphy said. “It was very scary.”
Despite those fears, Mr. Mac’s elevated prices did not cut into business.
“What we ended up finding was customers may not have been happy about it, but they were not surprised. I think they kind of understood that prices are increasing. They see it everywhere they go,” he said.
Murphy said the restaurant has since raised prices more than once to keep up with inflation.
A potential break from high prices
Multinational companies Colgate, Procter & Gamble and PepsiCo have raised prices by double-digit percentages over the past year, according to their first-quarter earnings reports, outpacing the US inflation rate.
However, as the Federal Reserve hikes interest rates and the economy slows down, customers may soon be less keen to pay through the nose for goods and services, Zheng said.
Businesses may already be in tune with the change: Those surveyed by the New York Fed said they expect lower cost and price pressures in the coming year.
Emily Netti, a wedding photographer in Syracuse, New York, said she has raised prices by a few hundred dollars multiple times over the past two years to pay competitive rates to the additional photographers and editors she hires. However, she said she is mindful that her local customer base may soon want to cut back on expenses.
“I’ve started to slow down in my own market within Syracuse,” she said.
“I do see myself raising by $100 rather than $300 for now, so I can match the market.”
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Inflation
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Homeless people living in hostels and supported homes in England are at risk of being forced back on to the streets as providers prepare to close beds and services in the face of soaring costs, charities have said.They say catastrophic rises in energy bills coupled with underfunded council contracts threaten the viability of hundreds of homelessness charities and could derail the government’s promise to end rough sleeping by 2024.A fifth of homeless charities have already reduced services in response to cost of living pressures, while nearly half say their frontline services will be at risk over the next few months, according to a survey by Homeless Link, which represents homelessness providers.One charity told the Guardian it had received estimates suggesting its combined annual gas and electricity bill would rise by £500,000 from May. As well as potentially ruinous increases in energy bills, providers say their viability is threatened by councils refusing or being unable to increase funding in line with costs.Homeless Link’s chief executive, Rick Henderson, said the survey findings suggested there could be a surge in the number of people sleeping rough, and he urged the government to ensure funding for homelessness services rises in line with inflation and providers continue to receive support with energy bills.He said: “Due to local government funding pressures, the vast majority of homelessness services are having to scrape by on budgets set when inflation was a fraction of what it is now. Meanwhile, providing accommodation is energy intensive, with services unable to pass on the cost of higher energy bills to people they support.“The government made a commitment to end rough sleeping in England by 2024. But inaction now will lead to hundreds of vital services across the country shutting down, leaving the people they support with nowhere to turn but sleeping rough or other types of homelessness like sofa surfing or being placed in expensive emergency accommodation.“These aren’t just statistics but real people, forced backwards to return to homelessness, affecting their physical and mental health.”Homelessness services in England currently operate about 32,000 beds across every council area, as well a range of specialist services including drug and alcohol addiction support, mental health help, employment and skills training, and refuge provision.Despite a 141% increase in rough sleeping over the past decade, the homelessness sector has contracted significantly, with 26% fewer beds in England since 2010, according to Homeless Link. There has also been a fall in the number of day centres providing food, warmth and support for homeless people.Amanda Dubarry, the chief executive of Your Place, a charity based in Newham, east London, which runs one of the biggest homeless hostels in England, said financial pressures meant it was now looking at pulling out of delivering key services and reducing the number of homeless people it could support.It had received a quote for annual energy costs from May of £620,000, up from £124,000 in the current year under a fixed rate agreed two years ago. “Without government help, we just have to cross our fingers and hope wholesale energy prices come down,” she said.The charity also faces pressure to meet rising wage costs, while many of its tenants are struggling to pay a nominal service charge that goes towards the hostel’s energy costs. “At the moment we are already struggling to meet the rising level of homelessness need, and we are heading for an implosion of some sort,” Dubarry said.Derek Heath, the chief executive of Druglink, a homelessness charity that rents 75 specialist properties for vulnerable adults across Hertfordshire and Bedfordshire, said it had pulled out of a three-bed home for female ex-offenders because it was no longer affordable, “the first time we have ever had to give back a property for monetary reasons”.Changing Lives, a large homeless provider charity based predominantly in the north-east of England, said it was reviewing its contracts with local authorities “line by line” to assess their viability, and it was unsure whether it would continue to deliver some services.“We are seeing more people coming into our services facing destitution and with nowhere else to turn, and others who are unable to move on from our services because they simply cannot afford to,” said the charity’s chief executive, Stephen Bell.The Homeless Link survey was carried out between September and November 2022 and 356 of its 900 members responded.The Department for Levelling Up, Housing and Communities said: “We are committed to ending rough sleeping and are spending £2bn over the next three years to tackle rough sleeping and homelessness. This includes £500m to councils across England for a range of services including outreach services and accommodation.“Homelessness services will receive a discount on high energy bills until 31 March 2024, providing them with reassurance against the risk of prices rising again.”
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Nonprofit, Charities, & Fundraising
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Just over a third of hospitals are complying with price transparency rules: report
More than two years after federal hospital price transparency rules went into effect, only about a third of hospitals are currently in compliance, according to new report released this week.
The nonprofit Patient Rights Advocate (PRA) released its fifth semi-annual report this week, in which it found that only 36 percent of 2,000 surveyed hospitals were in complete compliance with the rule.
Since Jan. 1, 2021, hospitals have been required to give “clear, accessible pricing information” on their products and services, either through an online file or a “consumer-friendly” display of shoppable services.
The PRA’s report specifically found that while most hospitals have posted files about their prices, 64 percent of them had files that were incomplete or listed prices that were not “clearly associated with both payer and plan.” Another 69 hospitals — 3.5 percent — did not post usable files on their charges.
While less than half of all hospitals were found to be in complete compliance, that is still higher than the 25 percent compliance rate that was reported in February.
The data used for this report was gathered from publicly available hospital websites from May 9 through July 14.
“Continued noncompliance impedes the ability of employer and union purchasers, patients, and technology developers to analyze and compare prices,” the PRA said in its report.
The PRA also examined the enforcement of penalties. The Centers for Medicare and Medicaid Services (CMS) is in charge of enforcing compliance, and, as the PRA noted, two hospitals that were previously penalized monetarily came into compliance soon after.
“In February of 2023, CMS acknowledged in a blog post that 30% of hospitals (approximately 1,800) were still noncompliant,” the nonprofit said.
“Yet, in April of 2023, only two more hospitals were fined. Both were still found to be noncompliant in this review. As of the time of this report, a total of four hospitals have been penalized, 0.2% of the hospitals that CMS recognized as noncompliant. Clearly, CMS is not strongly enforcing the rule.”
The organization sent letters to congressional leaders and President Biden detailing its findings, asking that further action be taken in order boost hospital price transparency and compliance with the existing rule.
The PRA recommended “increased, meaningful fines for noncompliance,” cutting down loopholes that allow hospitals to skirt the rule and expanding price disclosure requirements to include providers at all points of care.
Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Nonprofit, Charities, & Fundraising
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BSE Q2 Results Review - Strong Performance Across Parameters: Motilal Oswal
The relaunch of BSE derivatives products has proved to be a trend-changing measure.
BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Motilal Oswal Report
BSE Ltd. reported profit after tax of Rs 1.2 billion in Q2 FY24 (beat on our estimates), up 303% YoY but down 73% QoQ (gain on sale of Central Depository Services Ltd. stake recorded in Q1 FY24). However, adjusted PAT came in at Rs 1.07 billion, up 71% QoQ.
BSE's reported operating revenue of Rs 3.1 billion, up 46% QoQ and 59% YoY, beating our estimates.
After the relaunch, derivative contracts (Sensex and Bankex) are witnessing significant traction from market participants. BSE has increased transaction charges on Sensex options (only on near expiry), with effect from 1st November '23. Thus, the derivative segment would see strong revenue growth.
We have upgraded our earning per share estimates by 16%/23% for FY24/FY25 to factor in the better-than-expected equity cash volumes and increasing treasury income from clearing and settlement funds.
Reiterate 'Neutral' with a one-year target price of Rs 2250 (based on sum-of-the-parts valuation).
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
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Stocks Trading & Speculation
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- Quality of life, bitcoin-friendly tax laws and a huge influx of expats have made Lisbon one of the crypto capitals of the world.
- Crypto investment firm Greenfield recently named Lisbon the most important crypto hub on the planet, outranking New York, Berlin and Singapore.
LISBON, PORTUGAL — Matadors and bitcoin maximalists are regulars at Campo Pequeno, a neo-Moorish bullring in the northernmost reaches of the Portuguese capital city.
The two aren't all that different. Both are typically defiant and stubborn, engaged in a seemingly hopeless battle that pits man against beast, where the goal isn't just survival but total domination. Each fights against the status quo — one against the laws of nature, the other against the financial establishment. In the case of the maxis, these rebels don cryptographic code instead of capes, pinning their revolution on the decentralized ledger technology they believe will change the world as we know it.
Every month, bitcoin's biggest fans in Lisbon — an eclectic bunch of mostly expat digital nomads — descend on this 19th century arena to sip Licor Beirão, talk shop and extol the virtues of a world run on bitcoin. The storied venue is also a fitting metaphor for the bull run that many of these bitcoiners hold out hope for during crypto winter, the name given to the period of prolonged, depressed pricing in digital assets that can last for years.
Software engineer Lorenzo Primiterra has been going to the gatherings since they began. He's a Peter Pan-type with black chipped nail polish and small black hoop earrings complimenting the tattoo on his right inner forearm that reads, in all caps, 'WHAT'S MY AGE AGAIN?"
Primiterra hails from Italy but has spent two of his last seven years on the road in Portugal. Sitting at a picnic table adjacent to the 10,000-person capacity arena, he tells CNBC that the inaugural bitcoin gathering took place in this same venue in spring 2022, the weekend after the collapse of Terra Luna — a popular U.S. dollar-pegged stablecoin project that imploded overnight, erasing half a trillion dollars from the sector's market cap in the process.
"A lot of people got burned in that," Primiterra said of the stablecoin's failure. "I guess a lot of people became bitcoiners from that event. They understood the importance of self custody of bitcoin, bitcoin on bitcoin blockchain, not on other chains."
But Lisbon as a city remains largely blockchain agnostic.
Every night of the week, there is some sort of industry gathering — recurring events like Web3 Wednesdays and Crypto Fridays at The Block, a popular clubhouse where industry enthusiasts can rent out co-working space. The city also plays host to major industry conferences like Web Summit and NearCon.
"I remember, two years ago, there was supposed to be an ethereum event here, and then solana organized another event and then they said, 'Well, let's do a blockchain week,' and then it became a blockchain month," said Primiterra.
"I went to the other blockchain events during the bull market, because every blockchain was offering drinks, and I'm like, 'Why not?'" he said.
Crypto investment firm Greenfield recently named Lisbon the most important crypto hub on the planet, outranking New York, Berlin and Singapore. In the recently released State of European Crypto Report, researchers point to its "profound DeFi scene" and the country's tax breaks as two big reasons for its top status.
Even as the government looks to roll back aggressive incentives for foreigners, the tax regime is still a lot more favorable than elsewhere on the continent — especially as the collective crypto market cap is nearly 60% off its all-time high. Add perks like the newly launched digital nomad visa and the fact that the city offers lower prices than other Western European hubs, and Lisbon has all the fixings of an ideal expatriate enclave for tech enthusiasts looking to save cash while they talk code.
This is a big part of why Primiterra, who has been in roughly 50 countries in seven years, is staying put in Portugal. He bought an apartment during the pandemic in an up-and-coming neighborhood outside the main city center — and has no plans to uproot anytime soon. Another big draw? A community of like-minded people.
"I like tech in general, so even if I know that a project is terribly coded tech wise — I'm like, 'OK, tell me how you plan to solve that double-spend problem,'" he said. "I can listen to it, I can counter-argue some of the stuff."
"I have friends in the ethereum community, and it's totally fine for me," added Primiterra, though he noted that one of his big side projects of the moment is looking to launch a co-working space dedicated to bitcoin.
A walk through Portugal's capital feels eerily similar to a stroll in San Francisco. Both boast a cityscape defined by steep streets and sudden vistas; hilly terrain sloping down to beaches dotted by kite surfers and sailboats; red, dual-towered suspension bridges marking the edge of the city bounds; and brightly colored old-fashioned trams snaking through narrow streets.
The two coastal cities are also honey pots for techies.
Jemson Chan is a software tester from Singapore who has been living in Portugal for nine months. Chan is currently working for a company that is not crypto related, but he says his passion firmly lies in bitcoin and decentralized tech.
"I came to Lisbon for the quality of life, the number of tech startups and the very burgeoning tech scene," said Chan.
Guy Young, the CEO and founder of crypto startup Ethena Labs, says the ambience drew him to Lisbon, calling it one of those ideal cities that strikes a good balance between picturesque architecture, a rich history, top-notch restaurants, great weather — and a solid community of crypto people.
Young's anecdotal take on the Iberian Peninsula reflects a common sentiment. In 2022, Portugal ranked sixth on the Global Peace Index, and it tops the list of best countries for expats. The number of foreign residents in Portugal has been on the rise for seven straight years, increasing by more than 40% in the past decade.
It also helps that there are clear ground rules on crypto in Europe, thanks to a law known as Markets in Crypto-Assets, or MiCA. While the guidelines aren't Portugal-specific, the comprehensive regulatory framework for digital assets makes it easier to navigate operating a crypto business or investing in virtual tokens in the eurozone.
Chan, who has a side hustle hosting his own educational podcast on bitcoin called Orange Pill Uncensored, says Portugal is a far more hospitable backdrop than the U.S. with its regulation-by-enforcement tactics deployed by the Securities and Exchange Commission.
"Ever since the FTX collapse and the current ongoing attacks by especially the U.S. government on centralized exchanges, there have been efforts from the grassroots level to create more decentralized platforms that deal with the on- and off-ramps to fiat," added Chan, pointing to decentralized marketplaces like Pocket Bitcoin, RoboSats, Bisque and Peach that allow users to buy and sell bitcoin.
Primiterra used to spend his days working to measure global internet censorship as part of his work with a sub-project of the dark web browser, Tor. But nowadays, he volunteers his coding skills to Bitcoin Map, an open-source tool that lets you search for merchants that accept bitcoin anywhere in the world.
Lisbon may be crypto-friendly, but businesses don't appear to be all that interested in accepting bitcoin as a form of currency. Primiterra says the list includes a handful of merchants including a ramen place and a dentist.
Seb True is a full-stack engineer who made the move to Lisbon over the summer. The British national initially traveled to Portugal on what was meant to be a short trip to make a presentation at the monthly bitcoin gathering. Soon after his arrival, he was hooked and committed to a three-month sublet.
True quit his full-time job so he could focus on traveling the world and teaching people about bitcoin from the perspective of sound money and the philosophy of libertarianism. He has dubbed his educational modules The Bitcoin Student, and he's looking to expand the brand by capitalizing on his engineering background.
Lisbon has been a relief for True, who previously ran underground workshops in Egypt where bitcoin is illegal.
"Apparently they throw people in jail for talking about it and just working on it or doing anything with it," he said. "That's actually the first place I started giving presentations on bitcoin."
He says he knew the risks but ultimately ignored warnings about his safety, because he felt the population could greatly benefit from learning more about decentralized virtual money that existed outside the reach of governments or central banks.
"It's a country that has experienced over 50% inflation just this year, people are suffering, they don't understand why and they don't know who to blame," continued True.
"Their view was, 'Oh, bitcoin, someone controls that, too, surely, so it's not going to be any better,'" he said, adding that it didn't take long to "orange pill" them, a phrase used by bitcoiners to describe the process of indoctrinating someone in the ways of bitcoin.
True has now shifted his focus to Portugal, describing Lisbon, in particular, as the ideal base to grow his enterprise.
"The people here that I'm meeting are doing things, actually creating content, they're active about making a difference, and they are interested in collaborating," True told CNBC.
"I've already had people contacting me asking to make content for me or for my project, not for any money, not for any fame ... but just because they're passionate, because they believe in the mission," continued True. "They believe in the idea, and that's really what's made me think, 'Wow, I should really stay here. This is where the community clearly is.'"
Before making the move from Asia to Europe, Chan pored over tax law in the European Union, narrowing down the ideal jurisdiction to either Switzerland or Portugal.
"If you know anything about Switzerland, it's a millionaires' and billionaires' paradise," said Chan. "Looking at me, I don't think I've achieved that level of success yet, so I chose the poor man's Switzerland."
The tax perks in Portugal are certainly a big draw.
The resident-non-habitual (NHR) status is a fiscal regime that in some cases grants expats living in Portugal total exemption from paying taxes on their income for a period of up to 10 years.
In addition, unlike the U.S., which treats virtual currency as property, taxing it in a manner similar to stocks or real property, Portugal views cryptocurrencies as a form of payment. That distinction is a game-changer with respect to taxes.
Up until the end of 2022, capital gains resulting from crypto transactions, such as cashing out and crypto-to-crypto trades, were not subject to personal income taxes. The government has since added more caveats to its crypto tax breaks, including a requirement that an investor hold a digital asset for more than a year before selling in order to avoid paying taxes on the sale.
This means that gains from buying or selling cryptocurrency, as with other fiat currencies, are not taxed if the trader holds on to their coins for at least 12 months. Meanwhile, profits made on crypto held for less than a year is taxed at a rate of 28%.
"This makes Portugal a really attractive place for crypto users to live," explained Shehan Chandrasekera, a CPA and head of tax strategy at crypto tax software company CoinTracker.io.
The only exception to the country's generous crypto scheme relates to companies registered in Portugal that deal in crypto. These businesses face some taxes under certain circumstances, like if they earn cryptocurrency by providing services in Portugal.
Expats tell CNBC the process of establishing residency is relatively smooth. It doesn't require owning any property, and unlike other crypto tax havens, such as Puerto Rico, foreigners aren't required to spend a certain number of days in the country.
Citizens of the European Union have the right to permanent residence in Portugal, and for non-EU citizens, it offers expats a few paths to residency, including the golden visa and the D7 Visa (also known as the retirement visa or passive income visa), both of which tend to attract wealthy foreigners.
The Portuguese golden visa is given to those who buy property, or invest a certain amount of money in the country.
There are also steps that involve getting a tax identification number, opening a bank account and formally applying for residency. Companies such as Plan B Passport streamline the application process for expats.
Plan B CEO Katie Ananina tells CNBC the company has helped hundreds of people from countries such as the U.S., the U.K., Australia and Canada obtain a second passport in one of seven countries, including Portugal. Plan B works in tandem with each government's residence- or citizenship-by-investment programs.
One drawback to Lisbon's burgeoning popularity: As more crypto fans flood the city, some of the longtime natives are complaining about rising prices, similar to other tech hubs around the world.
"There's been quite a sort of influx of foreigners that have come in recently," says Ethena's Young. "And there's been a bit of pushback around property prices, what's going on with sort of the prices in some of the restaurants and stuff like that. But as a foreigner who's come here, I have no complaints."
Wout Deley — who has been researching cryptocurrencies and their underlying technology since 2013 — was working as an international sales manager for a galvanization company in Ghent, Belgium, when he decided to sell his house, invest in tokens and hit the road.
After a few months traveling through Europe during the early days of the Covid pandemic, he ultimately settled in Portugal.
Deley invested two-thirds of the house-sale proceeds in cryptocurrency and then lived off the final third.
"At any given time, I have maybe — at a maximum — 10,000 euros ($11,450) in my bank account," said Deley. "All the rest is always in crypto."
For Deley, establishing residency in Portugal was a no-brainer.
"Cryptocurrencies in Belgium are massively taxed, and I was looking at seven figures of profit," said Deley, who said that he would have faced a tax obligation of close to 40% had he remained in Belgium.
"You want to double your profit? Just move to Portugal," he said.
Deley lives in Lagos in the southwest tip of Portugal. He says that he found a villa available as a long-term rental which was "very cheap" and that was enough to establish residency.
The living is easy in Portugal, according to Deley, who says the southern coastline of the Algarve offers the perks of Los Angeles — a warm climate and great surf — but without the traffic jams. And there is a solid social scene.
"It's full of expats. It's just paradise," continued Deley. He says that he knows of at least three bitcoin billionaires who live nearby — plus another 12 people at least, mostly from the U.K., who are moving to Portugal in the next few months for the crypto tax benefits.
Deley doesn't speak Portuguese, but he says that's not a problem because everyone speaks English. He is also surrounded by a lot of like-minded crypto investors. "Everyone has cryptocurrency here. Everyone knows bitcoin. Everyone has it," he said.
Deley says the crypto investor migration is good for Portugal, too.
"They have a huge brain drain. Younger people are leaving. So they're trying to be more open to people with capital, digital nomads," said Deley.
Meanwhile, Didi Taihuttu of the 'Bitcoin Family' wants to disrupt the typical expat experience in Portugal by building a crypto village.
The family is currently shopping for real estate. They've narrowed their options down to three different plots of land, one as big as 250,000 acres, in the Algarve.
The plan is to run the community in a decentralized fashion, in which the land is divvied up by the square meter and sold as non-fungible tokens, or NFTs, in order to signify ownership.
Taihuttu also wants to mine for bitcoin with solar and wind power and then use the heat produced by the rigs to warm houses in the winter, in a sort of closed-loop system.
The working plan, for now, is to use a decentralized autonomous organization, or DAO, to govern the community. DAOs run on blockchain technology.
"We want to build a decentralized lifestyle, which is the future," he said.
In the meantime, the Taihuttus found an abandoned inn and are retrofitting it to be the first web3 hotel in the Algarve that is financed and owned by the community.
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Crypto Trading & Speculation
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The White House is confident the public will come to appreciate the Inflation Reduction Act as it did with Obamacare as President Joe Biden dispatches John Podesta and Neera Tanden, aides to former Presidents Bill Clinton and Barack Obama, to promote the measure.
"I have some experience of working on the Affordable Care Act," Tanden, the White House Domestic Policy Council director, told reporters Wednesday. "It took people a little bit of time, but when people really focused on that act in 2017, 2018, people recognized the true benefit and really rose up to defend the law."
"My expectation is that as we implement these provisions, as people see in their pocketbooks that they are paying less for prescription drugs for the first time because of the Inflation Reduction Act, they'll make the connection," she said.
Tanden, a former top adviser to 2016 Democratic presidential nominee Hillary Clinton, also downplayed the likelihood that the Inflation Reduction Act will be rebranded after Biden told donors this month he had misgivings regarding the name.
"The law itself is delivering benefits, and in just a few weeks, we will have HHS announce the first 10 drugs that will be negotiated," Tanden said. "In the legislation itself, there is a framework for lowering drug costs, some this year, some next year, and for years to come."
"We have always known that the benefits will be delivered over time, but people are experiencing these benefits now," she added. "My focus is ensuring that people understand that they will have lower drug costs because of the Inflation Reduction Act, that those drug costs will be a real difference in their bottom lines."
Tanden additionally cited the $35 cap on the cost of insulin, as well as free shingles and tetanus vaccines for seniors, as she underscored the Inflation Reduction Act's broader popularity.
Biden's average job approval-disapproval concerning inflation is net negative 28 percentage points, 36% to 62%, according to RealClearPolitics.
"The Inflation Reduction Act — I wish I hadn't called it that because it has less to do with reducing inflation than it does to do with dealing with providing for alternatives that generate economic growth," he said in Park City, Utah. "We're now in a situation where if you take a look at what we're doing in the Inflation Reduction Act, we're literally reducing the cost of people being able to make their, meet their basic needs."
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Inflation
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Europe Has Yet to Solve Half The Stagflation Puzzle
(Bloomberg Opinion) -- Recession looms for the euro area, with the latest batch of data showing momentum has evaporated. The economy contracted by 0.1% in the third quarter, most of the bloc’s economies are flatlining, and Germany, its biggest engine of growth, is shrinking. Even supposedly good news, such as slowing inflation, just illustrates how quickly the outlook is deteriorating. It’s time to improve coordination between fiscal and monetary policies, which worked wonders during the pandemic but risks being rendered pointless.
The European Central Bank should accept that its interest rate-hiking cycle is over. Inflation has declined to the slowest pace since Russia invaded Ukraine, as the base effects from the energy-price shock fall out. October consumer prices rose by just 2.9%, down from 4.3% in September. Higher for longer may be the current global central banker mantra, but before long it may dawn on the ECB that September’s deposit rate increase to 4% was a step too far. While the inflation element of stagflation is under control, stagnation still stalks the region.
The Governing Council is adamant that it’s not ready to contemplate lowering borrowing costs, with core inflation still running at more than double the ECB's 2% target. However, money-market futures have already fully priced in the first rate cut from April next year, with two additional quarter-point reductions anticipated by this time next year — a doubling of what was expected just two weeks ago. Expectations are changing fast and may well start to price in deeper cuts if the economy continues to worsen.
Third-quarter earnings from euro-area businesses highlight the gulf with the US. With nearly half of the Euro Stoxx 600’s companies reporting so far, 57% have beaten estimates with earnings per share falling 8% annually, according to JP Morgan Chase & Co. analysts. This is some way behind the S&P 500 picture, where 78% of companies beat expectations and average EPS has grown 12%. The US economy has been consistently stronger than the euro area since the pandemic, but the gap widened in the past quarter. European equities are cheap for a reason.
Monetary tightening is starting to bite — “tight policy is showing effect,” prominent hawk Bundesbank chief Joachim Nagel conceded following the governing council's decision last week to pause on rates. Deputy President Luis de Guindos emphasized "the risks to the growth outlook are tilted to the downside," noting that the slowdown could be exacerbated if it turns out that the central bank’s squeeze is even more effective than anticipated.
That's a clear and present danger. Following eight years of a negative rate regime, a sudden 450 basis points of tightening in little over a year is delivering a shock to the euro region. Furthermore, the monetary pinch isn’t just about higher official rates. The ECB's balance sheet has shrunk by 20%, or nearly €7 trillion ($7.4 trillion), in less than a year. It’s also withdrawn super-generous commercial bank loans, and has stopped paying interest on reserves that banks have to keep with it.
Italian debt, the region’s weakest link, has weathered the surge in bond yields relatively well, with 10-year borrowing costs holding at around 200 basis points above German bunds. But there’s no sense in tempting fate by accelerating the unwind of the ECB bond holdings.
It's hard to be optimistic about the prospects for an economic recovery. Trade talks with the US, Australia and the South American Mercosur bloc have all foundered recently. The real economy is struggling as purchasing managers' surveys are looking pretty grim. Euro-area manufacturing is firmly into the contraction zone at 43 in October, and even the services sector at 47.8 is well below the 50 growth line. Money-supply aggregates have all turned negative. Moreover, the ECB's third-quarter bank-lending survey displayed a further tightening of credit standards. With corporate net demand for loans decreasing substantially, not only is the of credit waning but so is the .
Deutsche Bank AG economists expect the German economy, the region’s largest, to contract by 0.5% this year. Though third-quarter growth was not as weak as expected, the International Monetary Fund expects Germany to be the weakest of the major economies this year. German manufacturing PMI hit a low of 38.8, which implies a deep recession.
However, it is the speed with which the French economy has turned down that is even more concerning. October’s manufacturing PMI came in at 42.6, down from 57.2 only 18 months ago. It’s scant consolation that growth was 0.1% in the third quarter, with a boost from household spending still leaving it well off the pace seen earlier this year.
There are patches of relative strength, with Spain and Belgium showing a modicum of growth, but countries like Ireland, the Netherlands and Austria are already in or teetering on the edge of recession. More worrying evidence is coming from the labor market, with the German IFO Institute survey of companies' willingness to hire falling to the lowest level since February 2021.
This stagnation comes after the fiscal spigots have already been opened. The €800 billion pandemic recovery fund is in full deployment mode and several countries, notably Germany, have been effusive in upscaling domestic government expenditures. But this only serves to underscore the dilemma facing the euro area. There’s little point in governments splurging in an attempt to jumpstart their economies if the private sector is being choked by the ECB’s monetary strictures. More joined-up thinking is needed if the bloc is to avoid a deeply damaging recession.
More From Bloomberg Opinion:
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BOJ Shuffles Away From YCC, But Don't Tell Anyone: Moss & Reidy
-
Americans Like Sharing Bad Economic News Too Much: Claudia Sahm
-
Italian Bonds Are at the Mercy of the ECB: Marcus Ashworth
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. Previously, he was chief markets strategist for Haitong Securities in London.
©2023 Bloomberg L.P.
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Interest Rates
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- The Mega Millions jackpot has soared above $1 billion for the fifth time in history.
- However, the winner will pay a significant chunk to Uncle Sam before seeing a penny of the windfall.
- The next Mega Millions drawing is at 11 p.m. ET on Tuesday.
Currently, the 30-year annuitized payout is worth $1.05 billion, Mega Millions' fourth-largest prize to date. Winners may also choose the popular lump-sum option for a $527.9 million payout.
However, both options are pretax estimates and the winner will pay a sizable chunk to the taxman before seeing a dollar of the proceeds.
Tuesday's drawing is at 11 p.m. ET.
Whether you choose the lump sum or annuitized 30-year payout, it's important to seek expert guidance, said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
"Call your estate planning attorney before you do anything," he said.
Lucas recommends the winner hire a team of experts, including a financial advisor, tax professional, estate planning attorney, bank specialists and more, to navigate a range of financial decisions.
The chance of hitting the Mega Millions jackpot is roughly 1 in 302 million.
Before seeing a penny of the billion-dollar jackpot, the Mega Millions winner will pay a sizable chunk in taxes. There's a mandatory 24% federal withholding for winnings above $5,000 that goes straight to the IRS.
If you choose the $527.9 million lump sum, the 24% federal withholding shrinks the prize by nearly $127 million.
However, that's not the total tax bill, because the top tax bracket is currently 37%, according to Lucas, who encourages the winner to set aside 40% "just to be conservative."
The Mega Millions jackpot easily pushes the winner into the top federal income tax bracket, which is currently 37%. But they won't pay 37% on the entire windfall because "it's going to flow through the brackets," Lucas said.
For 2023, the 37% rate applies to taxable income of $578,126 or more for single filers and $693,751 or higher for couples filing together. You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
Single lottery winners will pay $174,238.25, plus 37% of the amount over $578,125. But for couples filing jointly, the total owed is $186,601.50, plus 37% of the amount above $693,750.
The 24% federal withholding may cover a large amount of taxes, but the final bill will likely represent millions more, depending on several factors.
You may also be on the hook for state taxes, depending on where you live and where you bought the ticket. Some states don't tax lottery winnings or don't have income taxes, but others may levy above 10% in the top bracket.
Tuesday's Mega Millions drawing comes less than two weeks after a single ticket sold in California won Powerball's $1.08 billion jackpot. That game's top prize is back down to $74 million, with roughly 1 in 292 million odds of winning the jackpot.
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Personal Finance & Financial Education
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With products on sale at Buckingham Palace, Westminster Abbey and museums across the country – as well in European capitals – Jeremy Shaw, managing director of Derbyshire-based Heritage Playing Cards, has particular reason to hope the coronation will be good for the business he set up 30 years ago.
The past few years have been anything but. First, the Covid pandemic shut all museums and their shops, meaning an almost total collapse in domestic and overseas sales. And then the country’s leading producer of heritage playing cards – whose popular kings and queens of England pack has been updated ahead of the coronation to include one of Charles III – saw its export business almost completely wiped out by Brexit.
The effect of Britain leaving the European Union has destroyed 85% of his company’s trade with EU customers – which accounted for 35% of its total turnover.
“Before Brexit, we got an order at nine in the morning and three days later it was sitting in a shop or museum in Paris or Brussels or Vienna,” said Shaw. “Now almost all of our EU customers have given up. The paperwork and the costs of getting packages over to the EU mean they think it is just not worth it. Brexit has been a complete and utter disaster.”
As well as UK-themed packs – the kings and queens, the prime ministers, the stately homes and many more subjects – the company has supplied European markets with bespoke packs for different countries, such as German castles and a pack celebrating the Brothers Grimm fairytales.
But not for much longer. “We are running down all our German and French stock and then we will finish. We will donate whatever we have left to schools as teaching materials for foreign language lessons,” said Shaw.
“We are just battering our heads against a brick wall. We spent so much time, effort and investment building up that market, and we might as well not have bothered.”
The initial problem for EU shops or museums that order cards from the UK is the form-filling. Then the customers find themselves stung by extra VAT charges when the goods arrive. All in all, it is proving too much for many small operators.
“We have to pay a fee to get the parcel out of this country … something like £3,” said Shaw.
“Then, when it gets to their end, they have to pay a processing fee. Then customers are told there is a VAT charge on that parcel. They then refuse the parcel, which has to be returned to us – and, to cap it all, we have to pay import duty to get it back again.
“It is an administrative nightmare for us and the customers. None of this happened before we left the European Union.”
Shaw said he recently received an order from the National Trust in Northern Ireland. Even this transaction involved post-Brexit form-filling, despite Northern Ireland being part of the UK, and London and Brussels spending much of the past two years trying to make intra-UK trade across the Irish sea easier. “It is just unbelievable,” he said.
Shaw’s company operates from the Derbyshire town of Ilkeston. Nearby is Cluny Lace, another small firm. It provided material for Royal wedding dresses, including that worn by Kate Middleton. It too has been in the headlines because of the disastrous effect Brexit has had on its business model.
The firm’s managing director, Charles Mason, says the taxman imposed an 8% duty on the return of all the lace it sent to France for dyeing. In a letter to the Financial Times he wrote: “We have spent more than 200 years building our business, fought for 30 years against the global textile trend of moving to the far east and have now been killed off by our own side in a couple of years. We all lose.”
The Office for Budget Responsibility has forecast that Brexit “will result in the UK’s trade intensity being 15% lower in the long run than if it had remained in the EU”.
Shaw added: “I have written to HMRC several times about all this and they don’t reply. They just send out their pointless circulars. They never get back with any answers.”
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Europe Business & Economics
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Welcome back to Chain Reaction.
To get a roundup of TechCrunch’s biggest and most important crypto stories delivered to your inbox every Thursday at 12 p.m. PT, subscribe here.
Earlier this week, OpenAI CEO Sam Altman’s audacious eyeball-scanning crypto startup Tools for Humanity started the global rollout of its Worldcoin product. The company wants to help build a reliable solution for “distinguishing humans from AI online,” enable “global democratic processes” and “drastically increase economic opportunity” the company said in a release.
The startup, which raised about $250 million altogether from backers like Andreessen Horowitz, Khosla Ventures and Reid Hoffman, said it’s rolling out its identity technology as well as its token internationally.
The project gives eligible participants 25 Worldcoin (WLD) tokens, currently worth about $55, for onboarding. During its trial phase, more than 2 million people signed up and scanned their eyes for the startup’s biometric database.
With that said, not everyone is excited about this endeavor and find the 25 tokens a nominal tradeoff for some of their biological data. Some people are also arguing that Worldcoin is exploitative for initially recruiting participants through poorer countries.
In an interview with MIT Technology Review, Worldcoin CEO Alex Blania acknowledged there was some “friction,” with the startup, but attributed it to the fact that the company was still in its early phases.
The “Orb tour” began in Tokyo in April 2023 and has spread to other locations across North America, Europe, the Middle East and Asia.
Although the Worldcoin token is not available to U.S. citizens due to regulatory restrictions, that hasn’t stopped the startup from advertising appointments to get your eyeballs scanned in major American cities like Miami, New York City and San Francisco. I even spotted a few advertisements this week as I walked through mid and lower Manhattan, but did not make an appointment.
Individuals who participate must consent to the startup’s biometric data collection. The consent form has three options: don’t agree to anything (no data collected and no scan happens), agree to Orb scan but opt out of data custody (data collected, but temporarily stored) or agree to Orb scan and full data custody.
Worldcoin’s services are also not eligible to people in 11 other countries, including Ukraine, Russia, Iran and Cuba, as well as the European Union, according to its user terms and conditions.
If Worldcoin succeeds, there’s potential for the startup to have one of the largest databases of human biometrics, which could come with security risks if the information is not protected properly. In turn, that data could help prove who is real online — and on the blockchain — a non-trivial problem to solve.
On the other hand, if the startup doesn’t gain mass adoption, it could leave investors with a big hole in their pockets, and could make those who signed up susceptible to their personal information being sold to others (which is apparently already happening).
With all that said, would you sign up?
This week in web3
- Wormhole digs out of its hole with new security measures to move on from $320M hack
- Avalanche Foundation to invest $50M in asset tokenization on its blockchain
- After federal court win, Ripple’s legal head still expects the battle for regulatory clarity to drag on
- a16z-backed Eco unveils Beam, a P2P crypto transfer service aiming to be a ‘global Venmo’
- Crypto wallet Zengo launches pro subscription with additional security features
The latest pod
Boys Club is a social decentralized autonomous organization (DAO) for the “crypto curious.” Originally designed to get women and non-binary people into the web3 world, it now aims to be an open space for anyone looking to get into the space.
Although it’s a social DAO, Boys Club has a handful of other ventures, like their newsletter and podcast, which I was a guest on, as well as events like crypto conference parties and trivia nights.
Before Boys Club, Deana and Natasha were co-founders of a recently acquired travel platform Allcall. Deana was also a communications partner for the blockchain-based Celo Foundation and Natasha previously worked at Fora Travel as a general manager.
We discussed the origin story for Boys Club, what trends Deana and Natasha are following and how they’ve seen the industry evolve since launching their group.
We also talked about:
- EthCC 2023 vibe check
- Inclusivity in web3
- Diversifying the industry
- Advice for the crypto newbies
The bonus pod
Stu spent most of his career working for traditional financial institutions in legal roles at firms like CIT Group, American Express and HSBC and left that world in 2019 to join Ripple.
Ripple has been around since 2012, but has been making headlines lately for the recent federal court ruling that stated the XRP token, which is linked to Ripple, is not a security when sold to the general public but can be treated as a security for past XRP sales to institutional clients.
We broke down the nitty gritty details of the U.S. District Court of the Southern District of New York federal court ruling for Ripple and what it means for the company, XRP token and crypto ecosystem.
We also talked about:
- Securities versus commodities
- Ripple’s SEC lawsuit
- Future regulation and clarity
- Advice for other startups
Need to catch up before you listen? Read these for a quick overview:
- Federal court rules Ripple’s XRP token can be treated as a security… sometimes
- Ripple’s XRP case ‘underscores the need for regulatory clarity’
Follow the money
- Flashbots raised $60 million in a Series B to help improve Ethereum-based infrastructure
- Web3 gaming developer Delabs Games raised $4.7 million in a seed round
- Decentralized cloud infrastructure provider Aethir raised about $9 million at $150 million valuation
- EthStorage raised $7 million in a seed round at a $100 million valuation to scale Ethereum through its layer-2 solution
- Side Protocol raised $1.5 million through a SAFT to grow its cross-chain liquidity network
This list was compiled with information from Messari as well as TechCrunch’s own reporting.
What else we’re reading
Want to branch out from the world of web3? Here are some articles on TechCrunch that caught our attention this week.
- Microsoft’s and Alphabet’s results indicate the AI game is more of a long-term strategy
- 5 founders discuss why SAFEs are better for early-stage and bridge rounds
- Finding CEO: It’s the new ‘Finding Nemo’
- Hackers are infecting Call of Duty players with a self-spreading malware
- Don’t fall into the toxic workplace trap
Follow me on Twitter @Jacqmelinek for breaking crypto news, memes and more.
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Crypto Trading & Speculation
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India State Elections - Stable Polity, Policy Continuity Could Yield Growth Dividends: Nirmal Bang
Policy continuity could result in the compounding impact of reforms
BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Nirmal Bang Report
In key state elections results declared on Sunday, the BJP has won by a significant majority in the Hindi belt – Rajasthan, Madhya Pradesh and Chhattisgarh. Since the Hindi belt accounts for a large proportion of Lok Sabha seats, the probability of a BJP victory in 2024 general elections seems high.
Political stability and policy continuity generally bodes well for the Indian economy and equity markets. GDP growth over the past nine years has averaged ~5.7% - below the trend growth rate of ~6% over the past three decades, partially on account of formalisation measures (pre-Covid) and partly marred by the Covid-19 pandemic. The economy has doubled in the past decade (FY24E: $3.6 trillion), but it could potentially near ~US$10tn in the next decade.
The next decade could potentially see the benefits of formalisation and efforts to improve the share of manufacturing and secure India’s place in the World, both politically as well as economically. At the same time, we believe that some resources would have to be allocated towards those left behind in the race towards formalisation.
Despite supply shocks, the incumbent government has managed to keep inflation in check while avoiding excessive fiscal profligacy, both of which bode well for a stable interest rate regime. The current regime has also shown inclination towards internationalising the Indian rupee, paving the way for a stable exchange rate regime.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
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India Business & Economics
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Federal investigators from five different agencies have formed a new task force to try and catch criminals using cryptocurrencies and the Dark Web to carry out illegal activity. The new Avengers-style crossover team includes agents from the Department of Homeland Security, federal prosecutors, the IRS’ Criminal Investigation Unit, and the Drug Enforcement Administration. They’re calling themselves the “Darknet Marketplace and Digital Currency Crimes Task Force.” They’re restricting their activities to Arizona for now.
The task force’s primary mission is to “disrupt and dismantle criminal organizations that exploit the appearance of anonymity on the darknet or use digital currency to facilitate criminal activities.” Investigators from the new task force say they’ve been crossing paths since 2017 but decided to formally come together now due in part to an increase in the use of the internet to facilitate the illegal sale of drugs, firearms, and technology in recent years.
“Ever-evolving technology has allowed drug traffickers and other criminal actors to expand into the digital world and use the darknet to engage in their illegal activity,” the task force wrote in a blog post. Law enforcement officials involved in the Digital Currency Crimes group, like DEA Special Agent in Charge Cheri Oz, believe the increased collaboration and resources provided by the task force will give them greater flexibility to quickly target suspects.
New, easily accessible advances in encryption technology and the mainstream adoption of more difficult-to-trace cryptocurrencies, the feds argue, have left law enforcement at a disadvantage. Encryption advocates, on the other hand, have long argued these tools are crucial to protect users’ privacy in an online world.
“Drug traffickers who are hiding in the darknet will be aggressively targeted and unmasked by this task force,” Oz said in a statement.
For now, the task force appears to be focusing its efforts in the state of Arizona, though it’s unclear whether it plans to expand its purview to other areas. The five agencies involved in the task force did not immediately respond to Gizmodo’s request for comment
In 2021, forensic crypto firm ChainAnalysis estimated cryptocurrency-related crime hit a then-all-time high, with illicit crypto addresses receiving $14 billion worth of crypto in a single year. Those figures were nearly double the $7.8 billion illegal addresses reportedly received the year before. Much of the seemingly surge in criminal transactions, ChainAnalsyis notes, owes to the rapid mainstream adoption of cryptocurrencies during that time.
Dark net transactions, which loosely refer to the underground economy only accessible through certain onion-routing software, have long been a hotbed for illegal activity. Though its anonymized nature makes it more difficult to find accurate figures on dark net transactions some estimates suggest anywhere between 37% to 57% of dark web purchases further criminal activity.
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Crypto Trading & Speculation
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Last week, a former George Santos aide pleaded guilty to federal charges in connection with a $500,000 campaign loan that the indicted congressman had entirely fabricated. But while that loan was fake, the money, eventually, became real.
According to a person with knowledge of the events, that fake $500,000 from March did in fact find its way into the campaign’s bank account. It just happened months later, as part of the $615,000 Santos loaned himself in four installments in September and October. Those payments are reflected on his campaign’s most recent filings—making good on something of an “IOU” to the campaign.
But even if Santos eventually delivered the money, legal experts told The Daily Beast he’s still in heaps of trouble.
According to the government’s charging information against Nancy Marks—who served as the campaign’s treasurer—Santos faked the loan to get help from a national political party understood to be the National Republican Congressional Committee. Essentially, prosecutors say, Santos invented the loan, along with 10 entirely fake maximum campaign contributions in the names of other people, so that his campaign could qualify for a special NRCC partnership program that helps promote promising congressional candidates.
This meant that a fake $500,000 loan made on March 31 with no real money behind it appeared in Santos’ campaign finance reports—filings that document how much money the committee raises and spends and has in the bank. But after Santos came under law enforcement scrutiny, and after Marks resigned as treasurer, the March 31 loan mysteriously stopped appearing in new reports. Instead, the campaign’s new treasurers began listing a series of brand new six-figure loans in October and September—real money that Santos loaned his campaign about half a year later, backfilling the $500,000 in an effort that would both keep the committee solvent and not draw attention to his previous deception.
The revelations change the timeline and raise new questions about the Santos campaign’s bewilderingly inconsistent financial statements, but they also bring the conversation back to square one, legal experts told The Daily Beast. In other words, the central questions are the same as they were earlier—where the money came from, how it was spent, and whether Santos lied about any of it to donors and the government.
Perhaps most notably, Marks pleaded guilty to a charge that has nothing to do with any of the 13 counts laid out in the indictment that Justice Department prosecutors brought against Santos in May. Still, the DOJ merged their cases, listing her as a co-defendant with Santos. Two people with knowledge of the investigation told The Daily Beast that additional charges against Santos appear imminent, noting that details in Marks’ plea agreement strongly indicate the new charges would include campaign finance violations.
The Daily Beast reached out to the attorneys representing Santos and Marks, but both declined to comment for this article.
In December 2022, Santos told The Daily Beast and others that the money he’d put into his campaign came from his own company, the Devolder Organization, the nebulous consulting firm Santos owns and uses to perform what are essentially brokerage services for private clients. A number of experts in campaign finance law laid out the case for why Santos’ description appeared illegal on its face. Given the fact that Santos didn’t appear to command the personal finances to make such a large loan—which the DOJ confirmed in Marks’ plea agreement—it seemed clear to them that the congressman-elect was describing a corporate pass-through, and possibly an illegal straw donor scheme as well.
The fake loan, combined with the new information that the money was eventually real, only reinforced those claims.
Jordan Libowitz, communications director for government watchdog Citizens for Responsibility and Ethics in Washington, told The Daily Beast on Sunday that “this is just an additional level of lying and criminal exposure.”
“None of this is remotely legal,” Libowitz said. “What we were originally looking at is that Santos appeared to have loaned his campaign money that he didn’t actually have, because it was illegally being funneled through his business from individuals who weren’t by law allowed to make such large donations. The loans would have hidden where the money came from, so that’s an illegal pass-through corporate contribution or a donation in the name of another person.”
Brendan Fischer, a campaign finance law specialist and deputy executive director of Documented, agreed.
“Since the beginning of the George Santos saga, a lingering question has been where the cash-strapped candidate came up with hundreds of thousands of dollars to put into his campaign,” Fischer told The Daily Beast.
“It would appear that Santos’s infusions of cash into his campaign line up with a series of questionable business endeavors,” he continued, noting that there are still many unknowns. While profiting from “shady get-rich-quick schemes” might infringe on other laws, he said, “it wouldn’t necessarily be a campaign finance violation to put one’s personal share of the proceeds into their campaign.”
But, Fischer explained, Santos still can’t treat his corporate bank account as a pass-through to his campaign. “Even if Santos’s clients paid his business for legitimate purposes, Santos would still violate campaign finance law if he treated corporate money as his personal funds,” he said.
If Santos financed the loans from business clients who were seeking to secretly support his bid, Fischer said, “then we’re likely looking at disclosure violations and contributions in excess of legal limits.”
In December, The Daily Beast revealed the names of four Santos corporate clients. Two of them also happened to be the parties involved in a $20 million yacht sale that Santos had brokered in September of last year, The New York Times later reported.
Other Santos associates have claimed they were solicited for major political contributions around the same time, which is also when prosecutors say Santos was pitching donors on the fake “dark money” nonprofit scheme that netted him a federal charge. (Santos also faces charges for wire fraud, unemployment fraud, money laundering, theft of public funds, and making false statements to Congress on his personal financial disclosures.)
Mathematically, it has always appeared impossible for the $500,000 to have been entirely fake. The Santos campaign reported spending almost every dollar it raised over the course of 2022, taking in $2,965,534.31 and disbursing $3,060,549.17. While The New York Times reported that about $365,000 in Santos campaign expenses appeared “missing” in filings—“with no record of where it went or for what purpose”—that fact, along with the other irregularities observed in Santos’ reports, would still not appear to fully explain how the campaign balanced a fake $500,000 loan (and $55,100 in nonexistent contributions) throughout the year.
The first Santos indictment was conspicuously bereft of anything related to the unprecedented and unjustifiable irregularities in the Santos campaign’s filings. The only campaign finance-adjacent allegations in the document involve a political nonprofit solicitation scheme outside of the campaign itself.
Marks’ plea agreement, on the other hand, is focused on the falsified loan and campaign contributions. But while Marks—who signed the campaign’s filings with the Federal Election Commission—admitted guilt to one count of defrauding the United States, she did not plead guilty to making false statements to the government by including that fake loan in filings, a charge that would have fit the facts laid out in her agreement.
The campaign’s filings, however, are a mess. They report the loans in contradictory ways across multiple reports—and in corrected versions of those filings—making it difficult to deduce what happened and when. For instance, in a February filing, the first without Marks, $100,000 in debt vanished, with no explanation. Then, while under DOJ investigation, the campaign filed the first report of its 2023 activity and changed several key facts: the dates Santos made the loans, the amounts of individual loans, and the total amount loaned.
The fake $500,000 loan vanished entirely in that filing, replaced with that amount and more in new loans from September and October—matching the “IOU” claim that the money did eventually come through at that time.
That same filing also erased $40,000 from the previous loan total, showing $715,000 instead of $755,000. The campaign’s next filing, in July, showed a total $530,000 in loans, which was quickly amended to reflect a total $630,000, adding back in a $100,000 loan from October that had appeared on the previous report. The discrepancy between $715,000 and $630,000 resulted from Santos repaying himself $85,000 from his donors’ money on May 30, after he was indicted.
Santos also appears to have reported outsized fees to WinRed, suggesting he used a legal backdoor “revenue share” arrangement to pay an unknown vendor.
The New York Times reported this summer that Santos sought to profit from a flood of donations to Tina Forte’s longshot 2022 campaign against Rep. Alexandria Ocasio-Cortez (D-NY). The report describes a Santos-run consulting firm, Red Strategies, engaging in the controversial but legal practice known as “revenue sharing,” where campaign consultants take payment on the back end of fundraising hauls. These deals result in FEC filings that show incomprehensibly large “credit card fees” to WinRed. Those amounts dwarf the online service’s normal 4 percent fee. But WinRed splits most of the money off to the contracted consultant on the back end, and the consultant’s payment is never publicly disclosed.
Red Strategies, like other revenue sharing firms, contracted an enormous commission from Forte—80 percent—which it collected from Forte via WinRed. But as the Times reported, some of the Santos campaign’s own WinRed payments show a strikingly similar pattern, suggesting that an unknown consulting firm—like Red Strategies—profited off of his campaign as well.
As it turns out, Santos was also using an entity named “RedStone Strategies” to illegally solicit major political contributions late in the election, as laid out in his indictment. One of the people he solicited, the Times reported, was a business client.
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Banking & Finance
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Relaxo Footwears Q2 Results Review - Margins Would Take Time To Normalise; Downgrade To 'Sell': Dolat Capital
Relaxo Footwears had taken ~15% price cuts during September 2022.
BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Dolat Capital Report
Relaxo Footwears Ltd.’s revenues increased by 6.8% YoY – came in line with our estimate. The growth was supported by 20% increase in volumes but was restricted by ~15% price reductions during past few quarters.
During last few quarter, gross margin expanded by 900 basis points. Lower raw material prices and rationalisation of high cost inventory during the last quarter has helped Relaxo Footwears to expand margins.
However, sequential contraction in Ebitda margin was a negative surprise. Nevertheless, with increase in growth momentum, we expect margins to normalise gradually.
We have downward revised our FY24/25E earning per share estimates by 19.8/14.6% at Rs 9.4/12.8 as Q2 performance was significantly below our estimate and introduced FY26E at Rs 15.5.
Valuing the stock at 55 times FY26E we arrive at a target price of Rs 850. Downgrade to 'Sell'.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
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Stocks Trading & Speculation
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Saks Fifth Avenue’s latest $3 billion bid to buy Neiman Marcus was rejected this week, people familiar with the proposed marriage of the two luxury retail archrivals revealed.
Neiman is reportedly open to a deal with Saks — which has tried three times to acquire its smaller but formidable competitor — but the two can’t seem to agree on the terms of a once-unthinkable merger, sources told The Wall Street Journal.
Saks’ offer valued Neiman — which owns Bergdorf Goodman in New York on top of its namesake high-end chain — at roughly $3 billion. Per Saks’ deal structure, a significant portion of that sum wasn’t in cash, which Dallas-based Neiman wasn’t happy about, according to The Journal.
The sum would mark a multibillion-dollar loss for Neiman, which in 2005 fetched $5.1 billion in the first of a series of debt-fueled buyouts that ended up crippling the company.
This week’s rejection, however, is just the latest in Saks and Neiman’s on-again off-again talks about a merger, which date back more than a decade and have largely fallen apart over disagreements over the price tag, sources told The Post earlier this year.
The Journal reported that both retailers will continue to mull a deal, though one likely won’t be reached before 2024.
The merger of Saks, which currently operates 41 stores, with Neiman’s 36 stores would almost certainly face antitrust scrutiny. Insiders say the companies would likely argue that their dominance in luxury has sharply eroded over the past decade with the rise of the internet.
As The Post exclusively reported in June, Neiman’s current private equity owners have squabbled over a potential exit. Neiman’s two minority investors — Davidson Kempner Capital Management and Sixth Street Partners — have been pushing for an immediate sale.
But the 116-year-old company’s majority investor — Pacific Investment Management Co., better known as PIMCO — had been willing to hold on longer, arguing that the business will improve, sources confirmed at the time.
By August, Neiman’s persistently disappointing results appeared to have finally swayed PIMCO to weigh a possible sale to 156-year-old Saks’ Toronto-based owner, Hudson’s Bay, which executed exclusive due diligence to evaluate Neiman’s business, sources with knowledge of the negotiations told The Post this summer.
Hudson’s Bay likely took Neiman’s inability to shoulder losses from the coronavirus pandemic into account. The chain declared bankruptcy in May 2020, blaming the pandemic for spoiling its turnaround and forcing it into a restructuring.
Neiman said it emerged from its high-profile collapse just four months after announcing its Chapter 11 bankruptcy protection process thanks to a restructuring plan that eliminated more than $4 billion of debt and $200 million of annual interest expense.
The luxury department store simultaneously announced that it was shaking up its board, and named former LVMH and eBay executives as directors, though CEO Geoffroy van Raemdonck would remain in the top job.
Neiman drew criticism over keeping van Raemdonck in his cushy position as he was known to take lavish pay packages for himself, even as the company he ran lost money, laid off employees and slashed pensions.
In 2020 — the year of Neiman’s bankruptcy — he walked away with a $1.5 million yearly salary, not to mention more than $2 million in stock options and a payment of $172,135 to offset taxes.
Including his $4 million bonus, van Raemdonck reportedly walked away with a pay package that topped $6 million in 2020.
In the year leading up to Neiman’s bankruptcy filing, van Raemdonck received three pay raises that saw his annual salary jump from $1 million to $1.2 million and finally to $1.5 million by early March 2019. Along with each bi-weekly paycheck, the executive also received a $19,230 bonus check, according to court documents.
Representatives for Saks Fifth Avenue at Hudson’s Bay and for Neiman Marcus declined to comment.
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Consumer & Retail
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A former governor of the Bank of England has launched a scathing attack on Liz Truss - accusing her government of turning Britain into "Argentina on the Channel".
Mark Carney also said Brexiteers such as the former Conservative leader - who became the shortest-serving prime minister in history when she resigned last year - had a "basic misunderstanding of what drives economies".
It came as the 58-year-old Canadian delivered a speech in which he praised "progressive" policies while attacking "far-right populists".
Mr Carney's mention of Argentina - which has become a byword in recent years for countries suffering from repeated economic crises - appeared to be a reference to the economic turmoil that followed the mini-budget drawn up by Ms Truss and her chancellor Kwasi Kwarteng last year.
Speaking at the Global Progress Action Summit in Montreal, the former Bank boss hit out at the "misguided view" that cutting taxes and government spending leads to economic growth.
He said: "Progressives build things that last - health care, infrastructure, schools, opportunities, sustainability and prosperity.
"Others, and there are others, have a different model. They are in the demolition business. Far-right populists see the anxiety of today as an opportunity to stoke the anger that's necessary for their project."
Mr Carney said populists, including Brexiteers, treated spending and tax cuts as a "Pavlovian reaction to every problem" which was "grounded in a basic misunderstanding of what drives economies."
He added: "It meant when Brexiteers tried to create Singapore on the Thames, the Truss government instead delivered Argentina on the Channel - and that was a year ago.
"Those with little experience in the private sector - lifelong politicians masquerading as free marketeers - grossly under-value the importance of mission, of institutions, and of discipline to a strong economy."
His comments on Truss were met with laughter - and then applause - from the audience.
Read more from Sky News:
Met Police responds to Russell Brand claims
Airport closed by flooding amid weather warnings
Sir Keir Starmer fails to rule out tax burden rise under Labour
Mr Carney, whose current roles include being the vice chair of Brookfield Asset Management, was replaced by Andrew Bailey as governor of the Bank in 2020 after he stayed on longer than expected due to concerns over potential Brexit disruption to the economy.
Ms Truss has repeatedly defended her time in power since leaving office. She has suggested her economic policies were not given a chance to succeed and believes they would have worked longer-term.
At an event in Westminster earlier this summer, she was overheard comparing sluggish growth in the UK to a "boiling a frog situation", saying it hadn't "dramatically gone away" with her exit from Downing Street, but "got worse and worse".
Ms Truss also said in February she still believed measures such as significant tax cuts were "the right thing to do for Britain" as she doubled-down on her economic ideology.
But also accepted that one of her most controversial measures - cutting the 45p tax rate for the country's highest earners - was "maybe a step too far".
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United Kingdom Business & Economics
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Joelyne King
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Charlie the superdog is the only member of the King family who got two Halloween outfits this year. His other costume is a doughnut.
Joelyne King
Charlie the superdog is the only member of the King family who got two Halloween outfits this year. His other costume is a doughnut.
Joelyne King
Charlie does not want to sit still for the photo.
The Chihuahua-terrier mix in a Superman cape perches next to some pumpkins, swirls and sniffs the decor. Joelyne King, behind the phone camera, raises the pitch of her voice to remind him he's a good boy. Then, she lifts up a dollar bill, and its crinkle grabs his canine focus for exactly long enough.
"We figured Superman would be a good costume because he's just a great all-around dog," King says on a recent visit to a Maryland farm for a fall festival with her family. One of her two children is about to celebrate her first Halloween.
"Usually I have multiple costumes for the kids, but I think this year we just went with one for each of them. Charlie was the only one that got two," King says.
When Charlie is not a superhero, he'll be dressed as a doughnut.
This Halloween, American shoppers are expected to spend $700 million on pet costumes, according to the National Retail Federation. Altogether, Halloween spending in the U.S. will likely top $12 billion, a new record. A National Retail Federation survey estimated that an average shopper would spend $108 on candy, costumes and decorations.
Alina Selyukh
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Bailey the Shih Tzu does not love costumes but does her best to embody a tiger anyway.
Alina Selyukh
Bailey the Shih Tzu does not love costumes but does her best to embody a tiger anyway.
Alina Selyukh
The survey found top pet outfit choices are pumpkin, hot dog, bat, bumblebee and spider.
The survey did not seem to ask the pets' opinions on the matter. Neither did Alyssa Peters and Mike Namaiandeh, dressed as Jasmine and Aladdin, leading Bailey, a cheerful Shih Tzu dressed as a tiger.
"When I pulled the costume out of the package, she kind of looked at me like, 'Do we really have to do this again?'" Peters says, laughing. "You've got to be a part of the team here."
Candy may be $500, but the thrills are priceless
Before the COVID-19 pandemic, Halloween spending was actually on a decline in the United States. But the lockdowns got more people into decking out homes for the holidays, and we haven't stopped.
Alina Selyukh
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The Denchfield family expects 400 to 500 children to walk through the haunted maze that has made the family's house a top Halloween destination in Bethesda, Maryland.
Alina Selyukh
The Denchfield family expects 400 to 500 children to walk through the haunted maze that has made the family's house a top Halloween destination in Bethesda, Maryland.
Alina Selyukh
"This is like a universal holiday that everyone can have fun with," says Kurt Denchfield, standing next to a crate of plastic gore: fake blood, loose severed limbs and bloody brains.
Every year, his family shape-shifts their front yard into a haunted maze that becomes a top Halloween destination in suburban Bethesda, in Maryland.
To get the treats here means to plod through fog and evade glowing skeletons, sparking electric tentacles, howling monsters — and at least one of six Denchfield children wielding a chainsaw.
Alina Selyukh
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Kurt and Heather Denchfield, with their son Jake, pose in their front yard, which is about to mutate into a haunted maze.
Alina Selyukh
Kurt and Heather Denchfield, with their son Jake, pose in their front yard, which is about to mutate into a haunted maze.
Alina Selyukh
Heather Denchfield is the purchasing department for the operation. She confirms one of the reasons that holiday spending is up: Everything is more expensive. Pricier sugar, cotton and building supplies mean costlier sweets, costumes and decorations.
To keep costs down, the Denchfields reuse a spooky stash of supplies from year to year. They got cornstalks and pallets through Kurt's landscaping business. But there's one Halloween luxury they won't sacrifice: the full-size candy bars that await survivors of the maze.
"We do go from full-size to fun-size by the time that the night ends," Heather says.
"That's after the 400th candy bar," Kurt chimes in. They estimate they've shelled out $500 on all that chocolate.
Alina Selyukh
toggle caption
Kurt Denchfield works on the haunted maze, which has been sprawling bigger every year.
Alina Selyukh
Kurt Denchfield works on the haunted maze, which has been sprawling bigger every year.
Alina Selyukh
And the number of visitors to the haunted maze seems to grow by 50 children each year, Kurt adds, though he doesn't know whether it's the spreading word or hyper Halloween spirit.
"We'll need a bigger front yard soon if we're gonna keep expanding it," he says. "Maybe we can annex the neighbor's yard for one night."
Talk about growing Halloween expenses. Step 1: Get a bigger lawn.
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Consumer & Retail
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Where it will cost most to heat your home this winter
(NEXSTAR) – A holiday gift is coming early this year. The average winter heating bill is expected to drop, according to projections by the Energy Information Administration (EIA).
After a large spike in heating prices (and basically everything else) last year, Americans are getting some relief from rising costs. The EIA attributes the estimated 20% drop in winter heating prices to a large supply of natural gas and expected mild winter temperatures, among other factors.
But even with drops across the board, residents of many states are still expected to fork over more than $100 a month to keep their homes toasty. Personal finance site MoneyGeek analyzed the EIA data to determine which states are likely to see the highest monthly heating bill come winter.
Illinois residents are the unlucky winners who land at the top of the list. The average monthly natural gas bill this winter is expected to be $133. If it’s any consolation to Illinoisans, last year it was $168.
Oklahomans aren’t faring much better with a projected monthly bill of $128.
Natural gas customers out West are the luckiest this year, according to MoneyGeek. Many Californians are getting hit with rate increases, but surrounding states in the region are projected to see bills drop $30 to $50 a month.
The states with the highest monthly natural gas bills expected this winter, according to MoneyGeek’s analysis, are:
The states with the lowest monthly heating bills are pretty easy to predict (Hawaii, Florida, Arizona), but even states that experience more frigid winter temperatures are expected to see a big drop this year.
The average heating bill in Alaska is supposed to drop by about $50 a month, according to MoneyGeek’s analysis. Coloradans could pay $45 less per month, while households in Wyoming, Utah and Montana should all see monthly savings around $40.
Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Energy & Natural Resources
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The short answer to this question is, “Yes, provided you are prepared to accept a modest standard of living.” To get an an idea of what a 60-year-old individual with a $300,000 nest egg faces, our list of factors to check includes estimates of their income, before and after starting to receive Social Security, as well as expenses after retirement. Your own prospects in this kind of situation will vary, but by doing the sorts of calculations and estimates below, you’ll have a reasonable idea of what it will take for you to retire at 60 with $300,000. Consider working with a financial advisor as you explore your prospects for retiring early.
Income After Retirement: Social Security
A good place to start your assessment of whether you can retire at 60 with $300,000 is by looking at sources of income, including Social Security. The program is reverse-means tested, meaning that the less money you made during your working years the less generous your benefits in retirement. Earnings scale up to the maximum Social Security income, after which additional earnings no longer add to your lifetime benefits.
The maximum taxable income changes each year based on inflation. In 2022, it is set at $147,000, meaning that during 2022 you accrue the most Social Security credits if you earn up to that amount. If you earn less, you will collect fewer benefits when you retire. If you earn more, it will not add to your benefits.
Your benefits also change based on when you decide to retire. You receive the smallest amount of money if you file at age 62, scaling up each month that you wait until a maximum benefit payment at age 70. The standard set of benefits are paid at full retirement age, which is set at 66 years and four months for everyone under the age of 65 at time of writing.
Finally, Social Security benefits change each year as the Social Security Administration and Congress adjust this payment for inflation.
For 2022, the average retiree Social Security is $1,657 per month. For the purposes of this article we will assume a retiree who begins collecting benefits at full retirement age receives the average payment. You can calculate your own estimated benefits at the Social Security Administration’s website.
Income After Retirement: Investments and Savings
The average retirement account generates an average return of about 5% annually. Some estimates place this number higher, but we’ll use conservative math. With a retirement account of $300,000, this means an average return of about $15,000 per year. If you withdraw only those returns, you can generate income from your retirement portfolio without drawing down on the principal.
Let’s assume there are no income sources besides this $300,000 retirement account and average Social Security benefits. In this situation, an annual 2022 income would be:
$15,000 from retirement savings
$19,884 from Social Security payments ($1,657 per month)
Total: $34,884 ($2,907 per month)
Income Before Social Security
The first two, six or eight years, depending on when you decide to start taking Social Security, will be the most financially challenging.
For example, if you begin collecting benefits at age 62 (the earliest you can do so), you cut your lifetime benefits to 70% of full value. In the case of an average Social Security benefit, this means that you reduce your Social Security benefits to $1,160 monthly or $13,919 annually and cut your total annual income (Social Security plus investment income) down to $28,918, or $2,410 per month.
In most cases, you will have to wait until age 66 and four months to collect enough Social Security for a stable retirement. If you want to retire early, you will have to find a way to replace your income during that six-year period. In most cases $300,000 is simply not enough money on which to retire early. If you retire at age 60, you will have to live on your $15,000 drawdown and nothing more. This is close to the $12,760 poverty line for an individual and translates into a monthly income of about $1,250 per month.
Potential Pitfalls
As tempting as it would be to draw down the principal of your retirement account, resist the urge. Consider the consequences of not resisting. To match the estimated $34,884 per year budget, you would need to withdraw $19,884 per year from the principal of your retirement account in addition to withdrawing all of its average returns, so nothing will replace those withdrawals. Over a six-year period this would chop your retirement account to $119,304 from $300,000. And as your withdrawals shrink your nest egg’s balance, that balance would produce less and less income. By the time you begin collecting Social Security, relatively little would be left of your original $300,000.
Therefore, with a $300,000 retirement account, the odds are you will need to wait until full retirement age before collecting Social Security benefits. Collecting Social Security early reduces your benefits for each month you start before full retirement age. If you begin collecting benefits at age 62 (the earliest you can do so), you cut your lifetime benefits to 70% of full value. In the case of an average Social Security benefit, this means that you reduce your Social Security benefits to $1,160 monthly or $13,919 annually, and your total income (Social Security plus investment income) down to $28,918 or $2,410 per month.
For most people this is not a practical budget. It is just a little over 200% of the national poverty line for an individual ($12,760 per year in 2022) and well below the median income. Even if practical for a short period of time, this budget leaves no room for unexpected or growing expenses. These could include higher medical bills as you age or inflation. It also removes any flexibility to adjust for market downturns in your retirement.
For most retirees, if possible, you should wait until full retirement age.
Retirement Expenses: Taxes
With a good sense of your annual income based on a $300,000 retirement, the next question is simple: Will that be enough?
With $34,884 in annual income and a planned retirement age of 60, we need to anticipate three main issues: Taxes, expenses and pre-Social Security expenses.
You may have to plan on paying income taxes in retirement. This depends on a number of factors, most critically whether you primarily used a 401(k) or IRA (which taxes your withdrawals) or a Roth IRA (which does not tax withdrawals). Social Security benefits may also be taxed, depending on how much you earn.
While not fully accurate, the best way to estimate if you will owe taxes on Social Security is to take half of your benefits and add them to the rest of your income. For an individual, if this comes to more than $25,000 per year from all sources, you will likely owe taxes.
In our case we would calculate taxes as follows:
Social Security benefits = $19,884
$19,884 ÷ 2 = $9,942
All other income = $15,000
$15,000 + $9,942 = $24,942
When it comes to taxes, a miss is as good as a mile. We are below the $25,000 cutoff for individuals, and so our Social Security benefits won’t see taxes. This leaves us with only $15,000 of potentially taxable income. But individuals avoid taxes on capital gains below $40,400, so there are also no taxes on this money.
Now, it’s important to understand that we did not include potential state taxes in this analysis. And individual circumstances will vary. However, in this case, with $300,000 in retirement savings, average Social Security benefits and an individual filer, we can expect to pay no federal taxes in 2022.
Retirement Expenses: Annual Cost of Living
With $300,000 and Social Security, you can expect to collect just under $35,000 per year. On a monthly basis, that works out to about $2,900 per month. Is that enough to live on? It depends on numerous variables:
Do you pay a mortgage or rent?
Groceries
Utilities
What are your taxes (property, state and federal)?
What are your insurance (auto, life, medical, long-term care) expenses?
The above lists ignores entirely discretionary and luxury expenditures like travel and vacations. Even more critically, the above-listed expenses will rise yearly due to inflation.
In general, a retirement income of $35,000 is not unrealistic. At time of writing the median individual income in America, according to the St. Louis Fed, is $35,805. An income of approximately $35,000 is livable in the U.S. However, much of that depends on where you choose to live. Taking a retirement account like this to Kalamazoo, Michigan will be far more practical than trying to live in Chicago.
Reasons for Optimism
When trying to estimate your own lifestyle needs, most experts recommend estimating between two-thirds and three-quarters of your pre-retirement income. While working, you’ll have expenses that you won’t carry into retirement. In turn, you’ll also have more flexibility to move somewhere less expensive. That means that you’ll need less money than during your working life, though lifestyle bills can still add up.
In the case of a $34,884 retirement income, this estimate puts us around a pre-retirement income of $50,000 per year. If you earned around $50,000 per year before retirement, the odds are good that a $300,000 retirement account and Social Security benefits will allow you to continue enjoying your same lifestyle.
Bottom Line
By age 55 the median American household has about $120,000 saved for retirement, and about $212,500 in net worth. So getting to $300,000 by 60 means you’ll have to be a better saver or investor than the average American. That’s because for the majority of people, early retirement is probably off the table. But if you’re willing to budget and keep an eye – a very close eye – on your expenses, it is possible. Just remember that the years between age 60 and whenever you begin getting Social Security will be the most challenging.
Tips on Retirement
You can do some learning about retiring on $300,000, but a financial advisor may have more insight into planning for this than you do. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
It pays to get a good estimate of whether you’re financially ready for retirement. Use SmartAsset’s free retirement calculator to begin.
Photo credit: ©iStock.com/Fly View Productions, ©iStock.com/AsiaVision, ©iStock.com/sanfel
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Personal Finance & Financial Education
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The number of companies going bust this year is on track to be the highest since the depths of the financial crisis in 2009.
Insolvencies rose 10% from a year ago in the three months to the end of September, the latest official figures for England and Wales show.
There has also been a sharp rise in the number of firms at risk of going bust.
Firms in "critical financial distress" jumped 25% in the last three months, insolvency expert Begbies Traynor says.
They are defined as having county court judgments exceeding £5,000 against them - often a precursor to going under.
Dean Euden, a wine merchant from Cardiff, has already wound up his business. "I thought Covid would be the toughest time but actually the harder times came after," he said.
"The cost of living crisis meant people had less money to spend so I closed the shop and went online but there just wasn't the same spending power in the market," he added.
"I couldn't make ends meet, couldn't pay my suppliers, couldn't pay myself that's when I realised it wasn't a viable business anymore."
There are nearly 38,000 companies in critical financial distress, according to data prepared by analysts Red Flag for Begbies Traynor.
Julie Palmer, from Begbies Traynor, said this was down to a combination of higher inflation and borrowing costs twinned with weaker consumer confidence and demand.
"Tens of thousands of British companies are now in financial dire straits now that the era of cheap money is firmly behind us," she said.
"Businesses that had loaded up on debt at rock-bottom rates, and were only able to cling on during the pandemic thanks to government support, must now deal with a financial reality check as higher interest rates hit working capital for the foreseeable future.
"Taken together with stubbornly high inflation and weak consumer confidence, many of these businesses will inevitably head towards failure."
The construction sector saw the sharpest increase in companies facing critical distress with an increase of 46% compared to just three months ago.
That came as no surprise to Ceri Lee, director of Cross Group Building Works in Cardiff. He said while his firm had enough work to survive, higher borrowing and material costs meant a lot of people could not justify investing in home improvements.
"We've noticed a massive change since last year," he said. "Customers are getting hit because interest rates have gone up. They've got to make sure they are going to get out of the property what they are putting into it and with house prices going down a lot of customers have decided to ease off."
Mr Lee also said the volatile price of materials added more pressure and pointed to some timber panels they were installing in a home extension.
"These timber panels last year cost £56, this year they're £129 each and there's a limit to how much you can pass on to the customer because you just won't get the work so it comes out of your profits," he said.
"Pricing jobs is guesswork now. You go to some jobs blind - you wake up in the morning, things have gone up but you daren't go back to the customer because you might lose the job."
Support measures during Covid - including furlough, bounce back loans and forbearance on the part of HMRC - kept company failure rates low but those supports have fallen away at the same time as inflation and interest rates have risen hitting company bottom lines and their customers pockets.
Betina Skrovo runs a bakery with coffee shops in Cardiff and Penarth and said running a business now was gruelling and precarious.
"We felt looked after during Covid but now we have to pay back all the support we got and it's being sucked out of us just as we have issues with fuel and electricity bills," she said.
"Everything seems like a mountain and as you climb it, you keep slipping down. There's times when I say - I hope the dishwasher doesn't break, I hope the fridge doesn't break its that fragile. There's times when I can't pay myself. It if wasn't for my team I probably wouldn't keep going."
Ms Palmer from Begbies Traynor said she was hearing similar stories from other company directors who are phoning her company in increasing numbers asking for advice and saying they feel they have nowhere else to turn.
"We call it director fatigue," she said. "There are no solutions out there at the moment, and at the same time it's a pretty buoyant employment market so a lot of business owners are saying 'I just can't do this anymore, and I might as well just work for somebody else', and that's the choice they're taking."
Do you own a business? How are you coping in the current financial climate? Share your experiences by emailing haveyoursay@bbc.co.uk
Please include a contact number if you are willing to speak to a BBC journalist. You can also get in touch in the following ways:
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Banking & Finance
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Thousands of disabled young people who have money stuck in Child Trust Funds could also have their benefits cut.
About 80,000 young people have savings in trust funds and are unable to unlock their money without going to court.
Analysis by BBC News suggests about 4,000 of those are eligible for universal credit, but will receive lower payments because they have more than £6,000 in their accounts.
The government says it is speeding up the court process for families.
In April, a report suggested 80,000 young people who lack mental capacity to manage their finances were unable to access their Child Trust Funds without their families going through the Court of Protection.
The process can take months and cost hundreds of pounds, leaving many unable to access their money.
Using data from two trust fund providers, BBC News has now calculated that around 9% - about 7,000 - of those disabled young people have more than £6,000 in their accounts.
Of those, more than half will be eligible for universal credit, according to government figures on the population as a whole - and will see reductions to their monthly payments.
One charity, Contact, said this was a "double whammy" for disabled people and their families.
Claire Catherall feels her 16-year-old son Ryan, who is autistic and has learning disabilities, is getting "penalised" for having savings.
She has paid in £25 a month into his account since he was born, so there is now £8,500 in the pot.
When Ryan turns 18 he will be eligible for universal credit, which is a benefit for people who are unable to work. But he will receive about £43 less a month as a result of having more than £6,000 in savings.
Most universal credit claimants would stop getting payments if their savings or capital reached £16,000.
Claire, who has three other children, says she cannot face taking legal action to get access to Ryan's savings because she has a full-time job and is already fighting on many fronts to make sure Ryan gets the right education and support.
She stopped topping up his trust fund a few months ago, when she realised she would have to go through the Court of Protection to access it.
"I actually cried when I stopped the direct debit," she said.
Sitting hand-in-hand on their sofa at home in north-east England, Ryan gives Claire a big kiss on the cheek.
"He is so loving, so caring, but because of his autism he can also find the world very difficult and have challenging behaviours," she said.
"He will never be able to work and will always rely on benefits... so the importance of having those savings is massive."
Millions of children born between 2002 and 2011 received between £250 and £500 through the then-Labour government's Child Trust Fund scheme.
But it did not realise how the Mental Capacity Act - designed to protect people who lack capacity - would affect some families trying to access savings.
'Dangerous precedent'
The CEO of Child Trust Fund provider, One Family, believes making families go to court to access their child's savings infringes on his duty to the consumer.
Teddy Nyahasha's company has chosen to release £3.6m from 1,000 accounts, without involving the Court of Protection. Around 92 of those will have savings of £6,000 or more.
He is adamant that doing so is not in breach of the Mental Capacity Act.
He says if a parent is trusted by the government to handle their child's benefits, then they can be trusted to access their child's savings account.
"In most of these cases, these families are already receiving benefits from the government," he said.
"If you just follow that paper trail, you can establish the link between the parent who is looking after the young adult, and the owner of the money."
Alex Ruck Keene, a barrister who specialises in mental capacity law, warns One Family's stance sets a "dangerous precedent" which risks "infantilising" disabled people and leaves them open to financial abuse.
"The Court of Protection is a vital process in ensuring that people around those who cannot make decisions for themselves are always acting in their best interests," he said.
A government spokesperson said the Court of Protection was a vital legal process and that it had worked to reduce court waiting times.
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Personal Finance & Financial Education
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TORONTO — As more and more homeowners face mortgage renewals at surprisingly higher interest rates, some are facing the dreaded prospect of having to sell a home they can no longer afford.
But experts say while that option may be on the table, there are steps financially stretched homeowners can take before putting a "For Sale" sign on their front lawn.
"We need to acknowledge at the start that selling the house might end up being the only option for some homeowners," said Becky Western-Macfadyen,a financial coaching manager with Credit Canada.
However, homeowners should begin with reworking their family spending, she said, by looking at the money coming in and going out, including frequent expenses on household maintenance, car repairs and medical bills.
The next step would be to gather all potential ideas on paper to find ways of diversifying their income sources. That might mean a second job, asking for a raise at work or renting a room in the house, Western-Macfadyen suggested.
"Be realistic," she cautioned.
She also warned that in dire cases, drastic measures might be needed to lower spending.
"It's not the time to focus on cutting out lattes," she said. "You want to make sure you're making some big changes and it needs to be sustainable."
She suggested homeowners put any spare cash toward their current mortgage with a lump-sum payment before it gets renewed at a higher rate to help manage the expected increased monthly payment.
Homeowners can also seek help from a financial adviser or a certified financial planner to gauge what an affordable, yet sustainable, lifestyle could look like, according to Tony Salgado, founder of AMS Wealth.
As the mortgage renewal approaches, don't assume the first offer presented by a lender is the best rate, he said.
"If you have the opportunity to work with a mortgage broker, make sure you shop around," he said. "Because one per cent or a half per cent savings could be very valuable in today's environment."
The mortgage amortization, picking the most suitable option between fixed and variable rates and finding the best rate offer could also help soften the burden of higher rates upon renewal.
Current mortgage rates with traditional banks are north of five per cent, and rates with alternative lenders can be even higher. That compares with mortgage rates below three per cent during the pandemic when the Bank of Canada's benchmark rate was ultralow.
Salgado pointed out there's a popular belief that the rapid surge in mortgage rates is only affecting low- or middle-income households.
"It is a bit misleading," he said. "Whether you are low-income or a high-income person, provided you have a mortgage, these rates are affecting you."
However, someone with a higher income may be able to adjust better to higher borrowing costs by moving around assets, capital or retirement savings, Salgado said.
"When we work with lower-income people with a higher mortgage, they may not come with so many other investment accounts that you could tweak or move around to help offset those costs."
Salgado said some younger homeowners are turning to their parents for help in keeping up with rising mortgage payments, as a sort-of advance on their expected inheritance.
"We see that happening in our community," he said. "A lot of older generations would like to see the fruits of their hard work benefit the family while they're still alive."
However, if all of these options have been exhausted, it might mean it's time to move on.
"Mortgage is typically the very last thing that someone would let go," said Western-Macfadyen. "They probably maxed out their credit cards and lines of credit and at that point, they just don't see any other alternatives.
"You want to then take action," she said, which may include selling, foreclosure or surrender of the home.
Western-Macfadyen suggested homeowners should consider opting for a sale rather than getting foreclosed to avoid having the property sell for below market value and incurring the costs that might arise in a situation of surrender.
As higher interest rates take a toll on housing market activity, it could make it harder for homeowners to get the price they expected from the sale.
Talking to a licensed insolvency trustee could also be an option to help alleviate the stress of selling the house and managing debts.
But selling the property doesn't necessarily spell the end of the homeowner's responsibilities, she warned. Homeowners would still have to pay leftover utility expenses and house insurance until the ownership is transferred.
"It's not a pure walk away."
If the house sells at a loss, Western-Macfadyen said the homeowner is responsible for covering the difference — likely coming from other investments or reviewing other options such as consumer proposal or bankruptcy.
After the house is sold, the most obvious question follows: "Then what?"
Western-Macfadyen said people who sold their home have to face the housing market again — with higher interest rates, skyrocketing rental prices and the overall affordability crisis.
"There's a belief that rates are going to fall again," she said. "But that might not happen for years."
"Anyone who is going to be renewing in the next year or two is definitely going to feel this pinch."
This report by The Canadian Press was first published Oct. 16, 2023.
Ritika Dubey, The Canadian Press
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Real Estate & Housing
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- The Federal Emergency Management Agency is down to its last $3.4 billion after a string of major disasters.
- Friday's request is in addition to a $12 billion ask last month for FEMA's disaster relief fund, part of an overall $40 billion stopgap funding ask.
- The White House said the additional funds are needed in the wake of fires in Hawaii and Louisiana, and flooding in Vermont and Florida.
WASHINGTON — The White House is requesting an additional $4 billion from Congress to bolster funding for the Federal Emergency Management Agency, which is down to its last $3.4 billion after a string of major disasters.
Friday's request is in addition to a $12 billion ask last month for FEMA's disaster relief fund, part of an overall $40 billion stopgap funding ask. It also comes a day after the White House asked Congress to pass a continuing resolution to fund the government as budget negotiations continue.
The White House said the additional funds are needed in the wake of fires in Hawaii and Louisiana, and flooding in Florida due to Hurricane Idalia and Vermont.
FEMA Administrator Deanne Criswell said this week the disaster relief fund would be exhausted in the first half of September if it is not replenished.
Criswell told reporters Tuesday that FEMA is prioritizing the immediate needs of people impacted by the Maui fires, Idalia and disasters still to come, which means recovery efforts from past disasters are on the backburner.
"I want to stress that while immediate needs funding will ensure we can continue to respond to disasters, It is not a permanent solution," Criswell said. "Congress must work with us on the supplemental request that the administration has made on behalf of FEMA."
President Joe Biden visited FEMA headquarters Thursday and thanked personnel for their work while also promising Americans affected that the federal government would be there for them as they recover.
"I'm calling on Congress to make sure you're able to have the funds to be able to continue to show up and meet the needs of the American people to deal with immediate crises that we're facing right now, as well as the long-term commitments we have to make to finish the job in Maui and elsewhere," Biden said Thursday.
Congress is currently out of session on August recess but the Senate is slated to return next week. The House returns the week after. Biden pressed lawmakers to move fast on the FEMA request.
"We need this money done, we need this disaster relief request met, we need to do it in September, we can't wait," Biden said.
The president will travel to Florida on Saturday to assess the damage done by Idalia.
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Nonprofit, Charities, & Fundraising
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Thousands of HSBC customers in the UK have reported that they are unable to access mobile banking.
Downdetector, which tracks websites, showed more than 4,100 people had reported the banking app on their device was not functioning.
The problem comes on Black Friday, a day when many people will be making purchases due to the discounts offered by retailers.
The firm said it was "investigating this as a matter of urgency".
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Some customers of First Direct, a division of HSBC UK, have also said they are affected - though others have suggested they are still able to use the app.
The firm has around 14.8 million customers across the UK, though it is not known how many of these use mobile banking.
The firm previously announced it would close 114 branches in the UK in 2023. At the time, it said this was due to an increase in customers using online banking.
There are hundreds of social media posts from frustrated customers affected by the outage, but one common theme is a frustration that throughout the morning HSBC's service status page has claimed mobile banking is "operating normally".
Reports of the outage were first made at 07:00 GMT on Friday, according to DownDetector, with thousands of reports coming in by 08:00.
The exact number of people affected is unclear, because users must have a reason to check their online banking app to know if it is working.
How have you been affected by HSBC mobile banking going down? Tell us your story by emailing: haveyoursay@bbc.co.uk.
Please include a contact number if you are willing to speak to a BBC journalist. You can also get in touch in the following ways:
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Banking & Finance
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US graduates brace for return of student loan repayments
After a three-and-a-half year pandemic-era pause, US federal student loans start accumulating interest again from Friday, with repayments set to cut the monthly take-home pay of millions of Americans by hundreds, and in some cases thousands, of dollars.
Joe Biden campaigned for president on a pledge to forgive at least $10,000 in student loan debt for millions of Americans, and unveiled a $400 billion program to do just that after taking office.
But on June 30, the US Supreme Court ruled that his administration had overstepped its authority, and struck down the student loan forgiveness program.
As a result, interest on outstanding loans is back, with repayments due to restart from October.
"It was disappointing, but not surprising," Tiffanie Brown, a 43-year-old from Baltimore County, Maryland, with more than $100,000 in outstanding student loans, told AFP.
'Anxious' borrowers
More than 46 million people in the United States have outstanding student loans totaling more than $1.6 trillion, according to data from the Department of Education.
In the state of Maryland, residents with student loan debt owe more than $43,000 on average, according to AFP analysis of Department of Education data—the second-highest figure in the country after the District of Columbia (DC).
But unlike its wealthier neighbor, Maryland's per capita personal income was lower than nine other states and DC last year, according to Department of Commerce data, adding to the challenges of loan repayment.
"We're seeing that people are starting to get anxious about this," Dr. Tisa Silver Canady, a financial wellness advocate and founder of the Maryland Center for Collegiate Wellness, told AFP, referring to the return of loan repayments.
Some Americans, like Tiffanie Brown, have been able to successfully restructure their student loans.
This has allowed them to reduce—and even halt—their monthly student loan repayments, depending on their income.
But their loan balance remains, and often increases in size as it accumulates interest.
After more than three years, the return of student loan repayments could prove challenging for consumers who took on new financial obligations during the pandemic, according to Silver Canady.
"People who had that disposable income were able to do things like perhaps buy a home, or buy a car," she said.
"And now, I'm just concerned that for some people, it's going to be too much," she added, referring to the monthly repayments due on loans and mortgages.
Alternative solutions
Since the Supreme Court decision in June, Biden has officially rolled out another measure called the Saving on a Valuable Education (SAVE) plan, referring to it as "the most affordable student loan plan ever."
Under this new income-driven repayment plan, some borrowers could see their bills cut in half from 10 percent to five percent of their monthly discretionary income.
Loan balances would also be forgiven after a decade for borrowers with an original loan balance of less than $12,000.
While not as rapid as Biden's now-canceled loan forgiveness plan, it would still dramatically cut the cost of repayment for those who are eligible over time.
Under existing plans, some students who take up careers in public service or the non-profit sector can even have their student loans forgiven altogether.
But the criteria are stringent, and can differ dramatically depending on which administration is in power.
"It can change from year to year, you know, administration to administration," said Brown, who is hopeful she will eventually become eligible for some form of student loan forgiveness.
"You just never know with the government," she added.
© 2023 AFP
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Personal Finance & Financial Education
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Shoppers facing cost-of-living pressures turned to discount and second-hand stores last month, giving retail sales a surprise boost.
Sales volumes rose by 1.2% in February, official figures showed, the biggest monthly gain since October last year.
Food sales also rose, but the Office for National Statistics said there were signs price pressures had cut spending in restaurants and on takeaway meals.
Figures out earlier this week showed prices rising faster than expected.
February's rise in sales was stronger than forecast, and followed an upwardly revised 0.9% increase in January.
The ONS said the increase meant sales volumes were now back to pre-pandemic levels.
"However, the broader picture remains more subdued, with retail sales showing little real growth, particularly over the last 18 months with price rises hitting consumer spending power," said ONS director of economic statistics Darren Morgan.
The ONS said non-food sales rose by 2.4% last month, boosted by discount department and clothing stores. There was also "strong growth" in second-hand goods stores, such as auction houses and charity shops.
"Looking at the latest retail sales figures you might be forgiven for wondering if Britain really is in the middle of a cost-of-living crisis," said Danni Hewson, head of financial analysis at AJ Bell.
"But pop the hood and the reality is laid bare. Consumers appear to be choosing supermarkets over takeaways and snapping up bargains wherever they can," she added.
"People are hunting out bargains whether they're found in the sales aisles being well stocked by department stores, or in charity shops or other second-hand emporiums."
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Inflation
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Many Gen-Xers facing retirement ‘nightmare’ due to lack of savings: report
Members of Generation X don’t have much stored in savings, according to a new report from the National Institute on Retirement Security (NIRS).
The report found that the “forgotten generation” faces a “dismal” retirement future. The typical Gen X household — with those born between 1965 and 1980 — has around $40,000 saved for retirement, while the bottom half of savers only have a few thousands banked.
“Generation X grew up in the shadow of the postwar economic boom that so greatly benefitted their generation predecessors, the Baby Boomers,” the report says. “Many in Generation X spent their formative years as the United States grappled with the oil crisis, ‘stagflation,’ and a growing sense of disillusionment following the Watergate crisis.”
Slightly over half of Gen-Xers have employer-sponsored retirement plans, the report found. Most members — regardless of race, gender or income — are also failing to meet retirement savings targets.
Researchers blame an increase in college debt and bad luck in wider economic conditions for the lapse. They also note the rapid decline of pension plans, putting the burden of retirement planning more onto the retiree instead of an employer.
About 18 percent of Gen Xers have no retirement savings, the report states.
The NIRS advocates for additional structured retirement plans to make up for the decrease in pensions over time.
“Accruing savings takes time, and Social Security alone won’t provide enough retirement income,” NIRS research director Tyler Bond said in a statement. “So it’s critically important that we change course quickly. The status quo means we are looking at elder poverty for many Gen-Xers and pressure on their families for support.”
Gen X isn’t the only generation that could face retirement trouble. U.S. Census data found that nearly half of Baby Boomers and more than half of all workers don’t have any retirement savings.
Opinion polling released in May also found that less than half of Americans expect to live a comfortable retirement, a decrease from previous marks.
Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Personal Finance & Financial Education
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Sir Tony Blair has told the Conservatives to tax less and spend less, calling on the Government to use technological innovation to reduce costs in the public sector.
The former Labour prime minister told ITV’s Robert Peston that the Government “should be spending less and taxing less than they are at the moment”, advising the Tories to look into ways of using technological advancement to make the most of public spending.
Sir Tony said: “Even if you had extra money, the levels of spending are very, very high. The levels of taxation are high.
“Even if we didn’t have an immediate problem – which we do because of cost of living and inflation and so on – I think for any government that comes in today, the question is not how do you spend more public money, the question is how do you get value for the public money you spend?”
Sir Tony said the answer was the “technology revolution”, which he believes “offers Government the opportunity to drive through efficiency and change.”
Using the example of the healthcare sector, the former prime minister said there were many examples of “types of innovation in healthcare that take pressure off the system” and could ease the burden on the NHS.
“So what I’m saying really is the whole, and personally I find this an exciting project for Government, they should be thinking in every single area of the public sector – how do we use technology to do things completely different and reduce costs? Because in the end, we should be spending less and taxing less than we are at the moment.”
The former Labour leader also spoke about Sir Keir Starmer, with whom he shared a platform earlier this week at a Tony Blair Institute event in London, describing him as “very tough”.
He said: “It’s very easy to underestimate him because he’s not flamboyant, but he’s pretty immovable when he’s set his sight on something and he’s set his sight on governing and like he’s being at the moment, he’s being very tough with the Labour Party about spending commitments and I think he’s absolutely right.
He’s just saying: ‘Look, if we’re saying it’s as bad as it is, we can’t just made unfunded promises.’”
Among the recent rows over “spending commitments” that have caused friction in the Labour Party is the conflict over the two child benefit cap, which Sir Keir refused to say he would abolish should he become prime minister.
Sir Tony sided with the Labour leader, telling Peston: “I should imagine he, like me, is probably completely opposed to it. But the question is that before you get in and before you see what the state of things are, can you commit to changing it?”
When asked whether Sir Keir should have just responded to a question about whether or not he would keep the cap, which came into force in 2017, by saying that he did not know what he would do, Sir Tony said: “You can never say that, I’m afraid. I mean I can say that now because I’m not in front-line politics, but no.”
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Inflation
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Tesco has reported "encouraging early signs" that grocery inflation is starting to ease while revealing a leap in sales.
The UK's largest retailer said there was a slowdown in price growth across the market and it was continuing to focus on value for its customers.
The company updated on its performance as the food sector faces regulatory scrutiny on its pricing.
It is not obliged to give profit figures in its first quarter update but said UK like-for-like sales, excluding fuel, rose 9% to £10.8bn in the 13 weeks to 27 May.
Tesco reiterated its existing guidance for profitability over the full year, meaning there was no upgrade despite the strong sales growth.
The company said that data showed it had "led the market in cutting prices on essential items to support customers".
Just a week ago, Tesco was accused by a consumer group of a lack of transparency over its Clubcard discounts.
That followed an announcement by the Competition and Markets Authority (CMA) last month that it was examining the wider grocery and fuel industry for any failure of competition that could mean consumers are being overcharged.
Food inflation has proved among the most stubborn elements of the cost of living crisis in recent months, with the rate continuing to run above 19%.
While the bitter rivalry between chains, including the discounters, and diversity of choice has long been credited for healthy competition in the grocery sector, there are concerns they have been too slow to pass on wholesale price cuts.
On the fuel issue, pump prices have fallen sharply since large disparities between delivery and pump costs were flagged.
The government has warned it is examining the potential for food price caps amid frustration that grocery costs have been slow to follow suit.
The sector argues that punitive costs remain, especially in the supply chain, with energy and labour among the factors weighing heavily across the board.
Ken Murphy, Tesco's chief executive, said of the company's performance: "Customers continue to recognise our leading combination of great value and quality in every part of their basket - from essentials covered by our Aldi Price Match, through to our growing Finest range.
"We are very conscious that many of our customers continue to face significant cost-of-living pressures and we have led the way in cutting prices on everyday essential items.
"There are encouraging early signs that inflation is starting to ease across the market and we will keep working tirelessly to ensure customers receive the best possible value at Tesco."
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Inflation
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Britons tired of the cost of living crisis that has beset the UK have been thrown a lifeline: an invitation to move to Australia.
But not to Sydney or Melbourne – to the country’s vastest state, home to one of the most isolated cities in the world.
The state government of Western Australia announced on Friday that it wants to lure workers from the UK and Ireland to fill nearly 31,000 job vacancies across a range of sectors, including teachers, police officers, nurses, doctors and plumbers.
The timing of the advert is no accident. February is the hottest month in Western Australia, while Britain is at the tail end of a hard winter.
But the campaign to tempt people to leave has provoked a backlash in the UK – with the British Medical Association, and some MPs, raising concerns about the prospect of losing key workers.
Still, with Britain’s economy in a tough position, and strikes across the public sector over pay, perhaps some staff may be tempted to up sticks.
With the WA government promising “higher wages, lower cost of living and [a] surf-and-sunshine lifestyle”, the Guardian asked Britons already living in the area what those tempted by the offer can expect.
The surf and sunshine lifestyle is true
“It’s like 300-odd days of sunshine,” says Russell Burder, who moved from Essex to Perth where he works in the mining industry. “We haven’t had rain since December, the weather is just glorious.
“Once you sprinkle a few extra 100 days of sunshine on us Brits then we are a much happier bunch; we’re not whingeing Poms any more.”
Matthew Kieran, an academic who moved to Perth from London, says the weather and beaches mean he feels as if he is holidaying in Greece or Spain.
“It’s about a 10-minute drive from where I live to get to a nice beach, and not just one nice beach, there’s a lot of them,” he says.
Western Australia is huge
Western Australia takes up a third of the country’s land mass. It is 10 times the size of the UK. Perth, the state’s capital, is among the most isolated cities in the world.
Even a flight to Sydney on the country’s east coast takes hours.
It’s one thing to know this fact, it’s another to live with it, says Kieran.
“You’re miles from anywhere else, even the country is miles from anywhere else which I don’t think British people realise,” he says. “Don’t expect to be flying backwards and forwards to Sydney all the time.”
Services can be hard to access
Louise O’Neill, who moved from Bath to a rural part of southern Western Australia where she runs Farm Life Fitness, providing one-on-one health and wellness coaching, suspects the government may be looking to recruit people in rural Western Australia.
And life in rural Western Australia can mean a shortage of services.
O’Neill, who has lived in Australia for 12 years, says people would drive an hour and a half to see the physiotherapist because it was the closest one.
“The other day my friend drove five hours to Perth for a 20-minute medical appointment for her son.”
You need a car to get everywhere
Even in the city, public transport in Western Australia doesn’t compare with the UK, says Kieran.
“It’s a very car-orientated place, that was a big surprise,” he says.
It can be cheaper to live
Australia is now experiencing a cost of living crisis, but it doesn’t seem to be as bad as the UK, says Burder, who moved to Australia seven years ago. That’s part of the Western Australia government pitch: “WA salaries are often more than 50% higher than the average English salary for the same occupation.”
Burder says: “You get paid better here and the cost of living is cheaper than in the UK. Talking to my family back in the UK and they’re paying double what I am for gas and electricity.”
Buying a house is also much cheaper, says Kieran.
In London, he says he had a 60 square metre flat with no garden. In Perth, his family bought a three-bedroom house on a 700 square metre plot of land with a garden in the back and front yard.
However, renters may be less lucky, with some towns in the state facing an escalating rental emergency.
Shops close early
“You can’t get a coffee past three o’clock, it drives me nuts,” says Kieran.
Burder says you similarly won’t find much open on a Sunday in Western Australia. “It feels like where the UK was 20 years ago,” he said.
People look out for each other
“There’s a sense of community that I don’t feel like you get in England,” says O’Neill. “Especially in rural communities because there’s not much to do and you’re so far from things and so everyone looks out for each other.”
Being from London, Kieran says he was at first confused by how friendly people are.
“The first few days I was here, a car stopped in the middle of a street. And I was like, why is that car stopping? That’s really weird to me, and then the driver just signalled for me to cross the road.”
Maccas means McDonald’s, servo means petrol station
If you’re homesick, there’s always the comic relief of Australian slang, says Kieran.
“Everyone shortens everything. I was like: ‘What the hell is a servo? What is Maccas!?’” he says.
Burder also has a word of warning for Brits coming to Australia: thongs means flip-flops, not skimpy knickers.
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Workforce / Labor
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Rishi Sunak has said this morning that he wants to make the “right decision for the country” on HS2 as he insisted ministers would not be “rushed” on the subject.
Multiple outlets are reporting Sunak has decided to axe the line and will make an announcement in his keynote speech at conference tomorrow.
Number 10 has said that such reports are “incorrect”.
Speaking to BBC Breakfast, the prime minister said: “I know you want to keep asking, I know there is lots of speculation but all I can say is I am not going to be forced into a premature decision because it is good for someone’s TV programme.
“What I want to do is make the right decision for the country. This is an enormous amount of people’s money. Taxpayers’ money. Everybody watching. Billions and billions of pounds.
He added: “We shouldn’t be rushed into things like that. What people would expect from me is to take the time to go over it properly and make sure we make the right long term decision for the country. That is what I am interested in doing.”
Asked whether he had “given up” on the high-speed rail link between Birmingham and Manchester, Sunak said: “Absolutely not. We have got spades on the ground on HS2 as we speak and we’re getting on and delivering it.
“But it’s not the only thing we’re doing to help spread opportunity and level up around the country.”
Andy Burnham, the Labour Mayor of Greater Manchester, accused the prime minister of “pulling the rug” on the north of England over the reported decision to scrap the HS2 line between Birmingham and Manchester.
He told the BBC: “Look at the place. The place is doing so well at the moment. We have just brought in a new public transport system ourselves. Investors are flocking here.
“We are growing faster than the UK economy and you are going to pull the rug on us at this moment?
“Please, Prime Minister, at least give us a conversation, give us a chance to influence your decision before you make it.”
It comes after Conservative Mayor of the West Midlands Andy Street vowed not to let the government scrap HS2 from Birmingham to Manchester “without a fight”.
Street told the prime minister that he has a “very stark” choice in front of him over the future of HS2, explaining he would be throwing away a “once in a generation” opportunity to “level up”.
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United Kingdom Business & Economics
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Rishi Sunak’s government has set the country on course for a “more painful” austerity drive after the next general election than during the decade of belt-tightening under George Osborne, leading economists have warned.
A day after the chancellor’s autumn statement, the Institute for Fiscal Studies said Jeremy Hunt’s £20bn package of tax cuts was almost entirely funded by swingeing real-terms reductions to public spending planned from 2025.
Having sought to blunt the highest tax levels since the second world war, details contained in the chancellor’s plans showed persistently high inflation would slash almost the same amount from public service spending power by 2027.
While the government is committed to funding for key areas – including the NHS, schools, defence and overseas aid – economists said unprotected departments would face deep reductions in their budgets without a rapid change in course. Those likely to suffer the most are further education, local government, prisons and the courts.
The IFS director, Paul Johnson, said major cuts would be harder to achieve because of the era of austerity kickstarted by the former chancellor Osborne when the Conservatives came to power after the financial crisis.
“That was painful. Doing it again will be more painful still. Mr Osborne made his cuts after a decade of big spending increases. Mr Hunt, or his successor, will have no such luxury,” he said.
Leading economists said the government spending plans lacked credibility amid ballooning demand on public services – pointing to record NHS waiting lists, pressure on prisons and courts, and rising needs in social care.
The numbers present a potential trap for Labour as Keir Starmer’s party faces increasing questions over how it would turn around struggling public services without adding to borrowing or putting up taxes.
“We know this is a trap; it’s the same one the Tories set us in 1997,” said one Labour MP, highlighting how Tony Blair went into that election pledging to match the spending limits set by John Major.
Labour has backed Hunt’s tax reductions, having agreed the tax burden on working households was too high. Rachel Reeves, the shadow chancellor, said on Thursday the party would focus on growing the economy to fund public services.
“That’s the number one mission of an incoming Labour government,” she said.
Despite cutting the rate of national insurance, overall levels of taxation are set to reach the highest level in 75 years, while inflation remains high and economic growth struggles for momentum.
Against this backdrop, the Resolution Foundation said it expected the average household to suffer a £1,900 hit to their finances by January 2025 compared with their position in December 2019, with families on course to be worse off at the end of a parliamentary term for the first time in modern history.
Defending his plans for the economy during a round of interviews on Thursday morning, Hunt acknowledged tax levels were rising, but said: “I did make a start in bringing down the tax burden, we can’t do it all in one go.”
Downing Street did not deny that big cuts would be needed to stick to the chancellor’s fiscal rules. But a spokesperson said public spending would end up higher by 2028-29 than it was in 2019-20, even accounting for inflation.
The spokesperson added that the autumn statement “was about striking the right balance in supporting the British economy, supporting the British public and maintaining political stability, which the chancellor and the prime minister have worked so hard on over the previous year.
“We’re confident we have struck that correct balance. Obviously, that requires making critical choices, particularly on fiscal discipline.”
Against a backdrop of weaker levels of economic growth and persistently higher inflation, Hunt’s autumn statement made little provision for the allocation of funding for public services after the current three-year spending review period, which expires in March 2025.
It also confirmed real-terms cuts to public investment – used to finance the building of schools, hospitals and roads – equivalent to £20bn a year.
Richard Hughes, the chair of the Office for Budget Responsibility, the UK’s independent economics watchdog, said there was a “big question mark” over the spending plans, which were unusual compared with other leading countries.
He said: “If the question is: can the government cut spending in real terms and as a proportion of GDP, the answer is yes. George Osborne did it in 2010. Is it plausible to do it in the future? Well, it depends on what kind of choices [the government] wants to make.
“In any other country in the world, if you look at their fiscal forecasts, they have details going out five years. In our framework, these things run out until the government makes a political decision to run a spending review. That’s not how it works in other countries.”
The IFS said that, if the government held to its funding commitments for protected departments, such as health and education, this implied a 1.8% cut for unprotected budgets each year from 2024-25 to 2028-29 – including for prisons, the courts system, local government and further education. After taking into account funding settlements for Scotland, Wales and Northern Ireland, it said the plans implied cuts of 3.4% in England.
While the government could raise public sector productivity to maintain service levels, economists doubt efficiency gains on such a scale can be achieved.
Ben Zaranko, a senior research economist at the IFS, said: “Unless you can find some magnificent, heroic productivity improvements in those areas, it seems likely the range and quality of public services would have to suffer at some point.”
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United Kingdom Business & Economics
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Households find low waste living challenging. Here's what needs to change
Australian households produce about 12 million tons of waste every year. That puts the sector almost on par with manufacturing or construction.
But it doesn't have to be this way. With support, households can change patterns of consumption and develop a low waste lifestyle. Our new research explores how Australians engage with low waste living.
We interviewed residents about their existing waste management practices. We then invited them to design and implement their own six week household experiments. Their ideas ranged from home gardening and repairs to zero-plastic cooking and bulk store shopping. And then we brought them all together with policy-makers to share their experiences.
The results show that householders were keen to experiment with change but that low waste living is not easy.
Taking responsibility for recycling
For years, Australia sent waste materials offshore for recycling. When China banned these imports in 2018, Australian governments had to fast-track better waste management policies.
In a true circular economy, nothing is wasted. Resources are valued and continuously reused as they cycle through the system.
But in the transition phase, the focus has been on recycling as a way to reduce the amount of waste sent to landfill.
Soft plastics have been particularly problematic. In recent years, households have been encouraged to take soft plastics, mostly packaging, back to the supermarket. But the REDcycle soft plastics collection scheme was overloaded. Coles and Woolworths paused collection on November 9 2022 after it was revealed that the scheme had been unable to deliver on its recycling promises for months.
That followed the collapse of recycling company SKM in Victoria in 2019. Stockpiles of unprocessed rubbish filled warehouses, while other recycling was sent directly to landfill.
Several Australian states banned single-use plastics, most recently Victoria, but success will depend on making it easy to use alternatives.
Households produced the bulk of Australia's plastic waste (47%) and food/organic waste (42%) in 2018-19. Improving these statistics requires changes in social norms around lifestyles and consumption practices in conjunction with changes in retail practices, supported by regulation and new collection infrastructure.
Previous research has shown that households operate on the level in between the micro-level of individuals and the macro-level of communities. But there is a lack of appreciation of the role households can play in the transition to sustainability.
Experimenting with change
Transitioning to low waste living requires changes in household consumption and waste management practices.
The COVID lockdowns in Victoria provided both an opportunity and an incentive for many people to change their consumption practices. However, as life returns to the 'new normal', many find it far from easy to maintain a low waste life.
We conducted a series of innovative household experiments with 19 Melbourne-based participants.
A mother of two students wanted to be 100% waste free for six weeks, while another mother focused on zero-plastic cooking. Others committed to trying out bulk stores, while a woman living by herself started a garden. Another single woman wanted to learn how to repair her clothes and her bike, while a part-time salesworker living with his husband wanted to create a 3-week low-waste action challenge for his friends.
What we learned
Participants said they found household change very challenging.
We were told the experiments required extra mental capacity, time, money and motivation. Householders also needed more information and support to achieve, then maintain, the desired change in practices.
For some, the experience provided an incentive to try something different, such as walking the extra distance to the bulk food store rather than taking the easy option of the supermarket.
Changes didn't always stick. A transition to shampoo and conditioner bars required extensive research and was too hard for one: "Just that one switch was so intense … it was expensive as well."
Supermarkets were a major source of frustration around unwanted plastics: "The packaging is such a big problem. It's just ridiculous. It should be stopped … There are very few items that you can buy that doesn't have some sort of packaging."
Social relationships were important in low waste living. One woman said her family told her they were not prepared to go any further on the zero waste journey, while another had her husband and kids supporting her all the way.
The challenge of reducing food waste with children in the house came up too: "It's challenging to reduce how much food gets wasted with children. I have reduced how much I cook … I've tried to do stock takes of my freezer, my pantry, the fridge … to really focus on meal planning … But it's really, really challenging … I think if it was just me, I would have a lot more success."
Facebook groups were a useful resource "because it does make you realize that there are other people who are trying to save every piece of plastic from going in the bin".
Householders articulated many policy and system changes required to make low waste living easier including legislation on high waste producers, banning polluting products, improving recycling infrastructure, creating markets for recycled products, encouraging innovation, providing better information and improving product labeling.
The householders were aware of low waste alternatives in different parts of the world and frustrated by system failure in Australia.
"We need support and systemic change from the government (policy) and businesses (innovation) to drive down the amount of plastics associated with our everyday products," one participant said.
Low waste living should be made easy
We found experimentation within the home could be useful in designing and testing new policy. The experience can connect policy makers to real people and the things that matter to them, such as parenting, friendships, sharing a meal, 'making ends meet', and caring for others.
If the transition to a circular economy is to be successful, it needs to be planned from the perspective of everyday life within households.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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Consumer & Retail
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- The national debt of the U.S. reached a historic milestone by passing $33 trillion for the first time, the U.S. Department of the Treasury said.
- The level was reached less than two weeks before the federal government faces a potential shutdown over a lack of funding authorization.
- The issue of the debt is at the center of a standstill in Congress over a spending bill that would sustain the government until the next funding cycle.
WASHINGTON — The national debt of the U.S. reached a historic milestone by passing $33 trillion for the first time, less than two weeks before the federal government faces a potential shutdown over a lack of funding authorization.
The debt, which equals the amount of money borrowed by the federal government to cover operating expenses, hit $33.04 trillion Monday, according to the U.S. Department of the Treasury.
A roughly 50% increase in federal spending between fiscal 2019 and fiscal 2021 contributed to the debt topping $33 trillion, the department said.
Tax cuts, stimulus programs and decreased tax revenue as a result of widespread unemployment during the Covid-19 pandemic were factors in driving government borrowing to new heights.
The issue of the debt is at the center of a standstill in Congress over a spending bill that would sustain the government until the next funding cycle.
Republican lawmakers are pushing for less spending, while Democrats back President Joe Biden's programs, such as the Inflation Reduction Act, which is estimated to cost more than $1 trillion over the next decade, according to a University of Pennsylvania budget model.
House Republicans on Sunday released their own bill to fund the government until Oct. 31 in exchange for an 8% cut to domestic programs with exceptions for national security, according to NBC News.
But that bill is not expected to pass the Democrat-controlled Senate.
Congress has until Sept. 30 to pass a spending bill.
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Inflation
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Stocks To Watch: JSW Steel, Axis Bank, TVS Motor, Indigo, Delhivery, SJVN, Brigade Enterprises, Genus Power
Here are the stocks to watch before going into trade today.
Treasuries climbed after the latest economic figures underscored a gradual slowdown, reinforcing speculation the Federal Reserve will end its most aggressive hiking campaign in decades, Bloomberg reported.
The S&P 500 Index fell and Nasdaq 100 rose by 0.01% and 0.01%, respectively, as on 1:01 p.m. New York time. The Dow Jones Industrial Average fell by 0.30%.
Brent crude was trading 5.43% lower at $76.77 a barrel. Gold was higher by 1.25% at $1,984.44 an ounce.
India's benchmark stock indices rose over 1% before paring gains to close at a four-week high on Thursday.
Information technology, healthcare and consumer durable sectors advanced, while banks and fast-moving consumer goods were under pressure.
The S&P BSE Sensex closed 307 points, or 0.47%, higher at 65,982.48, while the NSE Nifty 50 ended 90 points, or 0.46%, up at 19,765.20.
Overseas investors continued to be net buyers of Indian equities for the second day in a row on Thursday. Foreign portfolio investors mopped up stocks worth Rs 550.2 crore, while domestic institutional investors also remained net buyers and bought equities worth Rs 705.7 crore, the NSE data showed.
The Indian rupee weakened 9 paise to close at 83.24 against the U.S dollar on Thursday.
Stocks To Watch
Banks and NBFCs: The Reserve Bank of India has made consumer lending costlier for banks and non-bank lenders, and also asked them to limit exposure to such loans amid growing risk concerns. Consumer loans will attract a credit risk weight of 125% as compared with 100% earlier. For NBFCs, too, consumer loans will attract a risk weight of 125%.
JSW Steel: The company said it has withdrawn the application to surrender one of its iron ore mines in Odisha's Keonjhar citing demand and supply scenario.
JSW Infrastructure: The company has received Letter of Award from Karnataka Maritime Board for development of all-weather, deep-water, greenfield port at Keni in Karnataka on PPP basis. The estimated cost of the Project is Rs 4,119 crore with initial capacity of 30 MTPA.
InterGlobe Aviation: IndiGo continued to dominate Indian skies with a 62.6% market share in October as per domestic air traffic data.
SpiceJet: The airline improved its market share to 5.5% in October.
Delhivery: Softbank-backed SVF Doorbell (Cayman) has sought to sell stake through block deals at Rs 403.5-413.85 apiece, as per Bloomberg. It holds 14.46% stake as of September end.
Axis Bank, Manappuram Finance: The RBI imposed a monetary penalty of Rs 90.92 lakh on Axis Bank and Rs 42.78 lakh Manappuram Finance for violation of certain directions of the banking sector regulator.
TVS Motor: The company announced its entry into Europe by signing an agreement for import and distribution with Emil Frey.
SJVN: The company has signed a power purchase agreement for 200 MW wind power project with Solar Energy Corp of India at a cost of Rs 1,400 crore. With the allotment of this project, the wind portfolio now stands at 497.6 MW.
IRB Infrastructure: Moody's affirmed the company's Ba1 CFR and India Toll Roads' Ba2 senior secured rating and maintained the stable outlook for both ratings. The company's assets benefit from long-term concession agreements that allow for regular toll rate adjustments and provide several protective measures against unexpected adverse events, the agency said.
Redtape: Unit Redtape HK has incorporated a subsidiary by the name of Redtape London.
PNB Housing Finance: The board will meet on Nov. 24 to consider issuance of NCDs up to Rs 3,500 crore on private placement basis in tranches over the next six months.
Coromandel International: The company unveiled its Coromandel Nanotechnology Center at Coimbatore, Tamil Nadu, which will support its efforts towards development of wide range of nano-enabled agro-inputs for plant nutrition and crop protection.
Genus Power Infrastructure: The company has incorporated a wholly-owned step-down subsidiary, namely 'Purvanchal Eav-3 Smart Metering' for manufacturing of all type of smart/advanced/ prepaid meters.
Technocraft Industries (India): The company will discontinue the production of Milange Yarn at its Milange Yarn unit located at Murbad, Maharashtra due to adverse market conditions and losses. During FY23, revenue contribution from this unit was 5.69% of total revenue.
DCX Systems: The board approved raising of funds of up to Rs 500 crore in one or more tranches by way of public issue, preferential issue, rights issue, private placement, qualified institutions placement(s) and/or any combination.
Brigade Enterprises: The company signed a joint development agreement with Krishna Priya Estates and Micro Labs for a residential housing project in Bengaluru for Rs 2,100 crore. It will develop around 2 million square feet of residential housing in Yelahanka, which is spread over 14 acres.
Bulk Deals
DB Realty: Authum Investment and Infrastructure bought 27 lakh shares (0.53%) at Rs 198.9 apiece and Neelkamal Tower Construction LLP sold 73 lakhs (1.45%) at Rs 199.05 apiece
Mishtann Foods: Aruna R Jain bought 70 lakh shares (0.7%) at Rs 15.94 apiece.
Insider Trades
Linc: Promoter Ekta Jalan bought 2,444 shares on Nov. 15.
Bajaj Healthcare: Promoter Anil Champalal Jain bought 11,00 shares on Nov.12.
Genus Power Infrastructure: Promoter Anju Agarwal and Monisha Agarwal bought 1,100 shares each on Nov. 12.
Ritesh Properties And Industries: Promoter Kavya Arora bought 4,383 shares and 11,227 shares on Nov. 12 and 13.
Advanced Enzyme Technologies: Promoter Advanced Vital Enzymes sold 33,971 shares from Nov. 13 to 15.
SKM Egg Products: Promoter SKM Shree Shiv Kumar sold 17,032 shares on Nov. 15.
Pledge Share Details
Inox Green Energy Services: Promoter Inox Wind created a pledge of 70.68 lakh shares on Nov. 13.
Who's Meeting Whom
Granules: To meet analysts and investors on Nov. 23.
Mahindra And Mahindra Holidays: To meet analysts and Investors on Nov. 23.
Ashoka Buildcon: To meet investors analysts and Investors meet on Nov. 22.
Piramal: To meet analysts and investors on Nov. 21, 24, and 30.
Emudra: To meet analysts and investors on Nov. 20, 23, and 30.
Polycab: To meet investors on Nov. 21
Navine Fluorine: Investor and analysts meet on 21 November
Archean Chemicasl: To meet analysts and investors on Nov. 22
ONGC: To meet analysts and investors on Nov. 21 and Dec. 1.
Tata Consumer: To meet investors on Nov. 21 and 22.
MCX: To meet analysts and investors on Nov. 22.
Narayan Hrudalay: To meet analysts and investors on Nov. 21.
Sobha: To meet analysts and investors on Nov. 21.
Saregama: To meet analysts and investors on Nov. 22.
Go Fashions: To meet analysts and investors on Nov. 21.
Aether Industries: To meet analysts and investors on Nov. 24.
IIFL finance: To meet analysts on Nov. 21 and 22.
NHPC: To meet analysts and investors on Nov. 21.
Trent: To meet analysts and investors on Nov. 21.
RBL Bank: To meet analysts and investors on Nov. 24, 27 and 29.
HDFC Bank: To meet analysts and investors on Nov. 21 and 23.
Thomas Cook: To meet analysts and investors on Nov. 21 and 22.
Timex Group: To meet investors on Dec. 1.
Trading Tweaks
Price band revised from 10% to 5%: Apollo Microsystem.
Ex/record-date Interim Dividend: Man Infraconstruction, Archean Chemical Industries, Bhagiradha Chemicals & Industries, CAMS, Gabriel India, IRCTC, Jamna Auto Indutries, K.P. Energy, Metropolis healthcare, MRF, Info Edge, Panama Petrochem, Polyplex corporation, Precision Wires, RR Kabel, Stylam Industries, United Spirits, Vidhi Speciality Food Ingredients.
Ex-date Dividend: Page Industries, Procter and Gamble Hygiene & Healthcare.
Ex/record-date Special Dividend: Ram Ratna Wires.
Move into short-term ASM framework: EMS, Kesoram Industries, Orient Green Power, Sharda Motors Industries, Sigachi Industries, Tilak Nagar Industries, Veranda Learning Solutions.
Move out of short-term ASM framework: Jaiprakash Power Ventures, Texmaco Infrastructure & Holdings.
F&O Cues
Nifty November futures rose 0.57% at 19,835.00, at a premium of 69.8 points.
Nifty November futures open interest fell by 3.26% by 7441 shares.
Nifty Bank November futures fell 0.26% to 44,273.00, at a premium of 111.45 points.
Nifty Bank November futures open interest fell by 8.92% by 13895 shares.
Nifty Options Nov. 23 Expiry: Maximum call open interest at 19,900 and maximum put open interest at 19,700.
Nifty Bank Options Nov. 22 Expiry: Maximum call open interest at 44,500 and maximum put open interest at 42,000.
Securities in the ban period: Chambal Fertilizers and Chemicals, Delta Corp, Hindustan Copper, Indiabulls Housing Finance, Manappuram Finance, MCX, SAIL, Zee Entertainment.
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Stocks Trading & Speculation
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- Two founders of Tornado Cash, the widely known Russian cryptocurrency mixer, have been charged with laundering more than $1 billion in criminal proceeds.
- In a newly unsealed indictment, Roman Storm and Roman Semenov have both been accused of sanctions violations and laundering money through Tornado Cash.
- Storm was arrested Wednesday in Washington state, but Semenov remains at large.
Two founders of Tornado Cash, the widely known Russian cryptocurrency mixer, have been charged with laundering more than $1 billion in criminal proceeds.
In a newly unsealed indictment, Roman Storm and Roman Semenov have both been accused of sanctions violations and laundering money through Tornado Cash, including hundreds of millions of dollars for the Lazarus Group, a sanctioned North Korean state-backed hacking group.
Charges in the indictment include conspiring to commit money laundering, conspiracy to commit sanctions violations and conspiracy to operate an unlicensed money transmitting business.
Storm was arrested Wednesday in Washington state, according to a statement from the Justice Department, but Semenov, a Russian national, remains at large. The third co-founder, Alexey Pertsev, who is not mentioned in this action, faces trial in Amsterdam over his involvement with Tornado Cash.
"Roman Storm and Roman Semenov allegedly operated Tornado Cash and knowingly facilitated this money laundering," said U.S. Attorney Damian Williams, adding, "While publicly claiming to offer a technically sophisticated privacy service, Storm and Semenov in fact knew that they were helping hackers and fraudsters conceal the fruits of their crimes."
The indictment also alleged that Storm and Semenov chose not to implement know your customer or anti-money laundering programs as required by law, and instead, advertised that the tumbler "provided untraceable and anonymous financial transactions."
Wednesday's joint action included the Federal Bureau of Investigation, the Justice Department and the Internal Revenue Service's Criminal Investigation unit.
The Office of Foreign Assets Control (OFAC), which previously banned Americans from using Tornado Cash in Aug. 2022, also sanctioned Semenov Wednesday.
Tornado Cash is used by some people as a legitimate way to protect their privacy in the still-nascent crypto market. When a buyer pays for something using a crypto wallet, the recipient of the transfer has access to the purchaser's public crypto wallet, showing account details and history. Using a crypto mixing service like Tornado Cash masks those details by anonymizing the funds and concealing the identity of the buyer.
But the service was also used in a number of high-profile crypto heists in 2022, including the $615 million theft of tokens from Ronin, a network supporting the nonfungible token game Axie Infinity, and a $100 million attack on U.S. startup Harmony. Both were linked by security researchers with Lazarus Group.
Blockchain analytics firm Elliptic found at least $1.5 billion in proceeds from crimes such as ransomware, hacks and fraud have been laundered through Tornado Cash, and that the entirety of the $100 million stolen from the Harmony bridge in June was laundered through the service.
The U.S. Treasury previously quoted a much higher figure for Tornado Cash and said it has been used to launder more than $7 billion worth of virtual currency since it launched in 2019. That figure refers to the total value of crypto assets that have been sent through Tornado Cash.
Some blockchain analytics tools have managed to "demix" crypto sent through Tornado to identify the source of the funds. Elliptic says it was able to trace crypto stolen from Harmony to several new ether wallets, for example.
In blacklisting Tornado Cash on Thursday, the Treasury Department said it was going after criminals, who used the service to launder more than $7 billion worth of virtual currency since it launched in 2019.
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Crypto Trading & Speculation
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- President Joe Biden tore into Republicans for opposing his student loan forgiveness plan.
- Biden renewed his suggestion that it's hypocritical for lawmakers to oppose his plan if their PPP loans were forgiven.
- The president's comments came in the wake of a Supreme Court decision that axed his current plan.
President Joe Biden on Friday criticized Republicans who opposed his roughly $400 billion student loan forgiveness program but gladly took federal pandemic relief funds in the wake of a Supreme Court decision that axed his current plan.
"We all supported the paycheck protection program, remember?" Biden told reporters in a brief statement from the White House. "It was a worthy program but let's be clear, some of the same Republicans, members of Congress, who strongly opposed giving relief to students got hundreds of thousands of dollars themselves in relief."
Biden and the White House have previously tweaked the GOP over what it sees as apparent hypocrisy. The fact that the president returned to the theme in the wake of Friday's Supreme Court decision underlines how Democrats may see political gains for pining the program's demise on more than just the Supreme Court.
Chief Justice John Roberts wrote the court's 6-3 decision that found the Biden administration did not have the proper authority under a 9/11-era law to propose roughly $400 billion in relief without explicit congressional approval. Roberts was joined by the court's other five conservatives in ruling against the White House in Biden v. Nebraska.
The Paycheck Protection Program, or PPP loans, are not directly analogous to student debt relief. The PPP loans were aimed at keeping business afloat during the pandemic by providing critical backstops to meet payroll and other limited needs.
This time, President Biden did not call out congressional Republicans by name but he did strongly hint at a few of them. He pointed out that some lawmakers "got over a million dollars."
Rep. Chuck Edwards, a North Carolina Republican who is serving his first term in office. Edwards had $1,133,907 in PPP loans and interest forgiven for an operating company for his McDonald's restaurants. Edwards, who praised Roberts' ruling, has previously dismissed criticism of his acceptance of PPP support.
"PPP loans benefited employees, it saved their jobs," he told the Asheville Citizen Times. "College loan forgiveness benefits one person and undermines the basic principles of personal responsibility." A spokesperson for Edwards did not immediately respond to a request for comment.
Rep. Vern Buchanan, a Florida Republican, received even more money. The Sarasota Republican had over $2.7 million in forgiven PPP loans and interests for car dealerships connected to him. A spokesperson for Buchanan did not immediately respond to a request for comment.
When news of one of the loans first became public, Buchanan said he would hope any small business would apply for the support.
"I would hope that small businesses in our area would apply to avoid laying off workers," he said in a statement to The Tampa Bay Times.
Biden also questioned how his plan could be considered so radical if PPP cost $800 billion.
"My program is too expensive?" he said. "The hypocrisy is stunning."
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Banking & Finance
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Wealth And Pension Funds Prefer India Over China, Study Shows
Global pension and sovereign wealth managers are flocking to India while growing hesitant on China, according to a new study.
(Bloomberg) -- Global pension and sovereign wealth managers are flocking to India while growing hesitant on China, according to a new study.
Almost 40% of investors chose India as the most attractive emerging market, while less than a quarter selected China in a survey by London-based think-tank Official Monetary and Financial Institutions Forum. It included 100 funds managing $26 trillion in assets, including Singapore’s GIC Pte. and Canada’s Caisse de Depot et Placement du Quebec.
The findings add to the signs of growing global optimism over India amid a cautious tone on China exposure. Beijing’s rising tensions with the West, policy mishaps after the pandemic and a weak economy have boosted India’s appeal as an alternate investment destination.
India is well positioned to benefit from its strong growth, demographics and diversification of global supply chains, said the report’s authors led by Deputy Chief Executive Officer Clive Horwood. India is becoming more open to foreign investors, they said, citing the scheduled addition of the country’s assets to JPMorgan’s bond index in June.
“In contrast, there is hesitation on China” they said. “No surveyed fund has a positive outlook for its economy or expects higher relative returns from Chinese assets.” The majority of the respondents listed regulation and geopolitics as barriers to investing in China and would put their money there mainly because it’s part of benchmark gauges.
Demand for Chinese assets has cratered in recent years, with foreign direct investment turning negative for the first time in the third quarter of the year as overseas investors pull out money on growing concerns over its economic recovery.
China’s CSI 300 Index fell almost 1% in Friday’s morning session and was on track for its lowest close since February 2019. That’s in contrast to a rally in Indian equities, where S&P BSE Sensex Index rose 0.7% to inch toward a new high.
©2023 Bloomberg L.P.
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India Business & Economics
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Artificial intelligence is being trialled in London to “listen in” to conversations between job centre staff and benefit claimants to help get them into work, The Sunday Telegraph can reveal.
The pilot is among a series of AI projects being tested by the Department for Work and Pensions, with ministers hopeful that the technology will revolutionise services and drive out cost across the public sector.
The Government is currently carrying out a review aimed at increasing public sector productivity.
Jeremy Hunt, the Chancellor, said at the Conservative Party conference that if the UK could increase its public sector productivity growth by half a per cent it would “stabilise” spending as a proportion of GDP, while increasing it by any more could “bring the tax burden down”.
Ministers believe that AI has huge potential to transform services, with benefits viewed as one of the most promising current applications of the technology.
The DWP is currently trialling five projects, including a pilot in London aimed at improving job matching for people looking for work.
Under the scheme, AI listens in to conversations between work coaches and benefit claimants, using machine learning to provide tailored advice on the best next steps to help get them into work.
The Work and Pensions Secretary, Mel Stride, has previously spoken about how AI has also been used to tackle fraud by spotting suspicious patterns in benefits data.
A Government source said: “Mel sees AI, working hand in hand with our excellent work coaches, as the future of employment support.
“As we bring through the next generation of welfare reforms, it will help us to achieve even better outcomes for claimants, taxpayers and the economy at large.”
While AI offers the potential to revolutionise the efficiency of the public sector, its application will stoke fears that it could displace large numbers of jobs.
However, the DWP minister Mims Davies said last month that it would “never replace” the role of job centre staff in “supporting customers throughout their journey”.
She said the department’s pilots were taking place under the auspices of a team called the Generative AI Lighthouse Programme, which was designed to “test and learn” the technology in a “safe and governed environment”.
“Where Artificial Intelligence is used to assist its activities in prevention and detection of fraud within Universal Credit applications, DWP always ensures appropriate safeguards are in place for the proportionate, ethical, and legal use of data with internal monitoring protocols adhered to,” she said.
‘Tailored help’
She added that AI would not “replace human judgement to determine or deny a payment to a claimant”, with a human always making the “final decisions, safeguarding the protection of individuals”.
Deploying AI to transform the DWP enjoys cross-party support. In a speech in July, the then shadow work and pensions secretary, Jonathan Ashworth, said the technology should be harnessed for “analysing job seeker skills and preference matching them with potential jobs”.
He said that AI would improve “personalisation” and provide a better experience for unemployed people while freeing up job centre staff “to offer greater support for more vulnerable individuals who need more tailored help, rather than spending hours correcting CVs and wading through lists of job postings”.
A DWP spokesman said: “Artificial intelligence brings great opportunities to grow our economy and deliver better public services for less.
“We are safely testing the use of new technology through five projects to match people with jobs, tackle fraud and provide a more efficient DWP service as we grow the economy and halve inflation.
“We will always ensure the appropriate safeguards are in place when using this technology.”
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Workforce / Labor
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Retailers hit the send button on push notifications, text messages and video streaming ads to reach US shoppers on Cyber Monday, touting heavily-discounted cosmetics, electronics, toys, clothing and other products.
Spending online on Cyber Monday is set to reach as much as $12.4 billion, according to Adobe Digital Insights, which tracks data through Adobe’s Experience Cloud service for e-commerce platforms.
That would represent a record and an increase of more than 5.4% compared to a year ago, Adobe said.
As of mid-day, investors pointed to Amazon, Walmart and Apple as possible winners for the day.
“It’s a little early to see how this all plays out,” said Jim Worden, chief investment officer of Wealth Consulting Group, which holds shares of Amazon. “There’s still good spending” online. “While the prices of TVs and some electronics have come down a lot, I don’t know how much the average consumer is going to nibble on these,” he said.
“One of the biggest things that we would be looking at is if the discounts throughout the day started to deepen,” said Brian Mulberry, client portfolio manager at Zacks Investment Management, which owns Amazon and Walmart stock.
But Amazon and Apple are “not having to discount things as much,” he said, which indicated possible healthy consumer demand for their merchandise on Cyber Monday.
Retail consultant Carol Spieckerman said at mid-day on Monday that “the biggest discounts are still ahead, and shoppers are all too aware of that.”
She pointed to lackluster store traffic on Black Friday, the day after Thanksgiving, as a sign that shoppers were ultra picky.
Overall Black Friday sales in stores and online rose by 2.5% compared to a year ago, according to Mastercard SpendingPulse, which measures all payment types.
Online US sales rose by 8.5% while in-store US sales increased just 1.1%, it said.
Charles Sizemore, chief investment officer at Sizemore Capital Management, said he expects retailers to have to discount more in the weeks ahead.
This makes him worried about profit margins at a time input and labor costs have not come down and shoppers continue to be picky. “I really think margins are going to be depressed,” during the holiday season,” said Sizemore, whose firm holds about $2 million of shares each in Walmart and Target.
Last-minute shoppers on Monday could spend $4 billion between 6 p.m. and 11 p.m. ET alone, said Vivek Pandya, lead analyst at Adobe Digital Insights. “Consumers are going to be concerned about discounts weakening after that,” he added.
Amazon began marketing Cyber Monday Deals as early as Saturday, including up to 46% off some Instant Pot kitchen appliances, 37% off certain Vitamix blenders, and 35% on Amazon devices including a 55-inch Amazon Fire TV.
Walmart, eager to capture market share, slashed prices on Sunday night, joining the trend of retailers’ early discounts on major shopping days. On Monday, Walmart stepped up discounts on some clothing to 60%, up from the 50% it offered on Black Friday.
Apple offered Apple Gift Cards of up to $200 with eligible purchases.
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Consumer & Retail
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Hull broadcaster and former Apprentice winner Michelle Dewberry has rounded on a proposal to give adults £1,600 a month, regardless of whether or not they work.
A trial of Universal Basic Income – which supporters say would tackle poverty and simplify the welfare system – is now being planned, with the intention of giving 30 candidates the sum every month for two years, without conditions. The pilot programme, which is currently seeking funding, would assess the impact this has on their lives and careers.
But Dewberry, who has become known for her outspoken opinions, said it would be impossible to fund a rollout of the plan nationwide when she debated the idea on ITV's Good Morning Britain. Have your say by taking part in our poll below.
She told Will Stronge, the director of Autonomy, the think tank behind the trial: "I read all 63 pages of your report and I struggled to find a single coherent way of explaining how on earth you would fund this situation. You're currently giving 30 people £1,600 a month and you're currently looking to find someone else's money to fund that pilot with.
"The total tax income in this country is £1,000,000,000,000 – about a trillion pounds. If you wanted to give adults over the age of 18 £1,600 a month, that would pretty much eat up your entire tax take in this country."
However, Stronge hit back. He said the proposals had the potential to halve poverty – though the actual monthly amount given to adults if the trial was rolled out might be more modest to begin with.
Proposals to introduce a Universal Basic Income have grown in popularity in recent years for a wide range of reasons, from discouraging low wages and reforming the welfare system, to protecting people against job losses from AI and robotics. However, concerns have been raised about whether it would discourage people from working and whether it could be paid for.
Today's debate sparked a slew of responses on social media. Shane Levitt said: "There are legitimate arguments against UBI, but the idea it’s just money 'gone' is the most ridiculous of them. This 'full basic income' wouldn’t just sit in people’s pockets, it would be spent in the economy, generating tax, growth and more employment."
Robbie Scowles added: "The only people who stand to lose from Universal Basic Income are those who make their money off other people and exploitation. If you give people [a basic income] the *vast majority* of the money goes straight back into the economy – through rent, bills, food shops etc. It’s inevitable."
However, others were concerned that introducing a basic income would make some people less inclined to work, or argued that the country simply could not afford to implement such a drastic change to the economy.
What would the trial look like?
The trial of Universal Basic Income would see 30 people in two different areas – Jarrow in the North East and East Finchley in north London – receiving £1,600 a month, with no strings attached. They would be observed by researchers from Autonomy to see how receiving the UBI impacts their lives. A control group would also be monitored to compare the experiences of those receiving the UBI against people in the same areas who do not receive the UBI.
The trial is yet to get off the ground because Autonomy is seeking "philanthropic investment" in order to pay for it.
So far, trials in other countries have be inconclusive. Finland ran a two-year trial that saw 2,000 people paid a monthly stipend of €560 (£490). At its conclusion, the government declined to extend the trial to all citizens.
In Scotland, a feasibility study has examined whether a "Minimum Income Guarantee" could be introduced by 2030. This would ensure no adult's income would fall below a set level. A full report on the plan is due to be published next year.
Wales is currently running a basic income pilot for 18-year-olds who area leaving the care system, which sees them provided with £1,600 a month for two years. Approximately 500 care leavers are eligible for the scheme, which will cost around £20m across three years.
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Inflation
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Kazakhstan is a highly digitalized society. The government has almost all information about its citizens. It is an 82 percent cashless economy, and the authorities strongly encourage the population to stop using cash, and switch to digital transactions instead. Very few people in the Central Asian nation use credit or debit cards when they go to grocery stores. Without a smart phone, life in Kazakhstan can be extremely difficult.
It is virtually impossible to order a cab unless one has a mobile application. Although drivers accept cash, they often do not have enough banknotes to return change. Paying with a card is not an option. The Kaspi mobile phone-based transaction platform is the most common method of payment not only for the taxi ride, but for all other services as well.
“It’s not that we plan to exclude cash from transactions. We’re just motivating people to go digital”, Bagdat Mussin, Kazakhstan’s Minister of Digital Development, Innovations and Aerospace Industry told Geopolitics & Empire in a conversation in the Kazakh Digital Government Office that looks more like a NASA space room.
In his view, the cashless economy has given the Kazakh government an opportunity to introduce a digital tax system. Now many people in the Central Asian nation pay taxes via smart phones.
“We started implementing the digital agenda even before the COVID-19 lockdowns, but the pandemic has helped us fully develop it. All public services in Kazakhstan are now connected.”
But in many countries, especially in Europe, there is a growing fear of the digitalization agenda, especially given that it is easy to manipulate citizens’ data if they are all integrated and concentrated in one place.
“That’s why Silicon Valley is not in Europe”, Mussin argues, claiming that the Kazakh government ensures data protection.
During a June 9 press conference, that turned out to be almost an informal event, journalists from Serbia and Croatia have been confronting the minister, trying to explain that such a policy violates the very basic principles of people’s privacy.
“To receive any government service in Kazakhstan, you need to give your permission first. If you don’t want digital platforms to have all the data about you, all you need to do is to press ‘no’ on your app. And then we won’t provide your date to anyone. But then, in order to get a certain service, you will have to bring a bunch of papers to various offices, collect documents, get stamps, and finish the job in a ‘traditional’ way”, the Kazakh Minister stressed.
According to Mussin, in Kazakhstan, citizens do not need to go to a public notary to certify a document.
“They can get it in a digital form, although they have to pay for that”, he claims. “They can also sell and buy a vehicle digitally. There is no need to go to a public office to change ownership. They can do that in less than five minutes online.”
Almost all banking platforms in Kazakhstan have been integrated into Kazakhstan’s Electronic Government Service. In order to get an access to this government-owned platform, one must first get an identification number at the public service center where they present their ID cards.
“The whole system is based on the identification number. It is the equivalent of the social security number in the United States”, Mussin explains.
The E-Government platform, according to the 40-year-old Minister, was created by “several private IT companies from Kazakhstan”. He, however, refused to say where the server is based.
“There are people in our country who do not want to deal with the digital stuff. They’re a tiny minority, though”, he said.
Mussin claims that Kazakhstan is the only country in the world where people can reach a mortgage deal in one day. Digitally, of course.
“In Kazakhstan, you can even get married digitally. But it’s not that you can go to a night club, meet someone there and then get married right away. This is how the system works: First you get engaged, click ‘engaged’ on your app, and then you have one month to think if you really want to get married or no. After that period expires, you can simply choose the ‘accept’ or ‘reject’ option on your smart phone.”
Indeed, it’s all about smart phones. Mussin emphasizes that 13 out of 19 million people in the Central Asian country use E-Government services on their smart phones. As a result, the government easily gets most information about its citizens.
“We know everything. When a woman gives a birth, a hospital just needs to click the button and we, the government, will get all the information about her and her child. Then the identification number of the newborn will automatically be forwarded to the social security department, and the government will pay the woman money into her bank account. It is a financial support for giving a birth”, Mussin explains.
But even though the level of digitalization in Kazakhstan is so high, the government, at least for now, does not plan to introduce the e-voting system.
“From a digital perspective, it is not a difficult solution. But from a legal side, it is not easy to ensure transparency in a digital voting process. After all, it is a rather sensitive political issue”, Mussin concluded.
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Banking & Finance
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Tata Steel Q2 Results Review - European Operations Continue To Struggle: IDBI Capital
During the quarter, the company incurred Rs 45 billion on capital projects (targeted at Rs 160 billion for FY24).
BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
IDBI Capital Report
Tata Steel Ltd.’s Q2 FY24 profitability was below with our expectations. India sales volumes remained flat QoQ at 4.82 million tonnes as Ebitda/tonne decreased by 16% QoQ to Rs 13,242.
Further, European operations profitability continued to remain weak. UK reported Ebitda loss of Rs 18,806/tonne in Q2 FY24 versus loss of Rs 5,331/tonne in Q1 FY24 and Netherlands reported Ebitda loss of Rs 9,296/tonne in Q2 FY24 compared to loss of Rs 8,574/tonne in Q1 FY24 as demand remained weak in Europe.
Tata Steel took an impairment charge of Rs 126 billion in its standalone entity towards potential impact of decarbonisation and restructuring in Europe.
We cut our FY24 Ebitda estimate by 8% while we make minor changes to our FY25 forecasts.
We revise our SOTP-based target price to Rs 110 (earlier Rs 118) and maintain our 'Hold' rating on the stock.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
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Stocks Trading & Speculation
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8 Ways You Could Be Growing Your Revenue
You didn't start your company to lose money. However, you don't want to just break even, either. Ideally, you want the healthiest possible profit margin. And that one way to...
This story originally appeared on Due
You didn't start your company to lose money. However, you don't want to just break even, either. Ideally, you want the healthiest possible profit margin. And that one way to do that is by growing your revenue streams.
As a refresher, revenue is the cash coming into the business. Typically indicated at the top of your organization's income statement, revenue is highly variable. Some years it might be up, some years it might be down. Ideally, you want your revenue to be as strong as possible to offset variable expenses.
Of course, boosting your revenue usually doesn't happen without a little tinkering. Sure, you might get lucky and enjoy an unexpected spike now and then. But you can't bank on luck. Instead, you need to put some measures in place to nudge your revenue higher and higher.
There are dozens of ways to promote revenue growth, and not all require that you nab more customers. To start, apply any of the following eight tactics. Just make sure to use your CRM or another centralized management tool to track your progress. Measuring based on objective data will allow you to figure out what works. When you find something that's producing fruit, set it on "repeat."
1. Reignite former customers.
Chances are good that you have information on your past customers. These were people you spent money to acquire and who spent money on your brand. Rather than accepting that they're gone for good, why not take steps to reignite their interest?
For instance, think about all the customers who have come back, filled a digital shopping cart, and left. According to Retention.com, seven out of 10 buyers fall into this category. Your objective should be to use the data you already have about them to encourage them to reconsider. You might send texts, emails, or even DMs as reminders. Or, you could try a retargeting campaign.
Although you won't recapture everyone who leaves, you'll bring some back into the fold. As a result, your revenue will be stronger than it would have been. Plus, you'll have the chance to renew your relationship with these "boomerang" buyers.
2. Increase your line of products or services.
Many companies striving for a revenue bump invest in the expansion of their products or services. The trick to making this work is to be sure that the new offerings are relevant. For example, an e-store selling winter recreational merchandise to adult consumers wouldn't want to add wedding gowns to its lineup. The disconnect would be too vast.
On the other hand, that same company might want to consider adding pet outdoor winter gear and supplies. Many people take their dogs (and some cats) with them on hikes, trails, and other excursions. Consequently, offering customers the chance to keep their four-legged companions comfortable could make sense.
Be certain to conduct research and don't just follow your gut instincts if you take this revenue-upping route. You'll be spending money upfront, after all, and you want to lower your risk as much as possible. The easiest way to do that is to do your homework and expand deliberately.
3. Reduce sales friction points.
A typical sales funnel is inverted for a reason. As leads move deeper down the funnel, some start to trickle out. This is natural, normal, and expected. Nevertheless, it's not giving your revenue much of a jumpstart.
Sit down with your team and walk through all the customer journeys that make up your sales funnel. Cross-reference those journeys with data. Where do you see areas of major lead drop-off? Those are gaps — and if you fix them, you should see a corresponding spike in bottom-of-funnel conversions.
If you're not sure how to correct a friction point, consider working with a marketing expert. It's worth spending money to do things the right way the first time. If you'd rather do everything in-house, make small changes that can be tested in real-time. Don't attempt to remedy all your gaps at once, because you might not know which strategy is serving up results.
4. Work harder on cross-sells and upsells.
Consumers who have had a good experience statistically spend 140% more in purchases than their dissatisfied counterparts. They won't automatically know what else to consider buying from your online store or catalog, though. You have to help them by introducing them to items through cross-selling and upselling techniques.
A cross-sell is the sale of something compatible with what a customer's buying. For instance, a consumer who buys a sofa may want a chair, an ottoman, a side table, or a floor lamp. An upsell is the sale of something more expensive than the customer originally selected. Adding extra cheese or sautéed mushrooms to a burger for a fee is an example of an upsell.
The good news is that there's a lot of software available to help you automate cross-selling and upselling. The software — usually augmented by predictive AI and ML technologies — can "fetch" cross-sell and upsell options. When done well, cross-selling and upselling can significantly impact your revenue rates.
5. Consider a subscription model.
Another way to give your company a bit of dependable income is through subscriptions. Just about any product or service could have a subscription element. That's why the average person pays $200+ in monthly subscriptions. The key is making sure that your subscription holds enough value for consumers to keep paying.
Part of the reason that subscriptions produce profits is that most consumers set them and forget them. People rarely use their subscriptions the way they think they will. That's why no one cancels their gym memberships in February even though they've stopped going since mid-January!
You can get as creative as you want with your subscription. Anything goes. Who would have assumed that clothing into a subscriber's delight? Or that people would want to have men's grooming products delivered? StitchFix and Harry's Razors, that's who. Therefore, be open to trying something out of the ordinary.
6. Explore a different audience.
Chances are strong that you haven't fully tapped into all the audiences who might be interested in your brand. These could be niche offshoots of your regular audience or a completely different audience than you've sold to before. Being able to conquer yet another target market can give new life to your revenue.
Unsure how to come up with new-to-you audiences? Conducting some social listening can be a good way to start. Find out what your customers are saying about your product online. Then, find out what they're saying about your competitors' products. You may unearth some hidden audiences that you've never marketed to.
Lucky Charms experienced this when the brand realized it wasn't marketing to a huge segment of buyers. It turns out, adults like the fun marshmallows almost as much as kids do! This is why Lucky Charms has been making its ads more adult-friendly for a decade. No doubt its revenue reflects its sweet revelation.
7. Improve your brand presence.
People can't give you their hard-earned money if they don't know you exist. Putting a push on your outbound content marketing and publicity messaging can put your company name in front of consumers. The more common your brand becomes, the more synonymous it will be with the products or services you offer.
A rapid way to establish your brand presence and reputation is through social media. Staying active on the social media sites preferred by your target buyers should give you a little steam. You'll just need to make sure you're posting and commenting regularly. Social media is about engagement, not just sales. The more give and take you provide, the more buzz you'll build.
You can amplify your social media presence through influencer marketing and paid advertising. Used in tandem with organic content deployment, influencer marketing and ads will strengthen your credibility. Ultimately, you'll get a nice lift that should carry over into your sales.
8. Adjust your pricing.
Your price points will affect your revenue. Even if you're wary about moving your price up or down, take it into consideration. Never assume that you'll lose customers if you move the needle up, either. Many customers who like what you offer won't have a problem paying a little more. As noted by The New York Times, consumers rarely jump ship as long as your price raise doesn't go overboard.
One caveat, however: Be careful about raising prices without warning, especially if you have regular customers. A customer who buys from you once a week or month will notice a price hike faster than one who buys occasionally. Giving notice that your prices will go up shows customers you're thinking of their needs. Additionally, it makes them feel like you're not trying to pull a fast one.
Still feeling uncomfortable at going higher? Give your best shoppers the chance to continue buying at the same low rate for a limited time. Or, keep prices the same for items that are purchased in multiple quantities.
Your company's revenue is a line item that you have more control over than you may have thought. If you want to see it rise, take action now. With some changes, you could be revenue rich and more profitable than you thought possible.
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Consumer & Retail
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Welcome to our live coverage of the trial of FTX founder Sam-Bankman-Fried, or SBF for short. Check out our explainer for everything you need to know about the trial. And follow along here each day as we report on the drama inside and outside the courtroom.Caroline Ellison, the former CEO of Alameda Research, is expected to take the stand today after lunch. She arrived at court in Manhattan earlier this morning.You can read more about Ellison, and the other key witnesses in the trial, in our in-depth explainer.Photograph: STEPHANIE KEITH/Getty ImahgesPeople in the crypto community tend to recoil from the idea that it’s crypto, not just Sam Bankman-Fried, that is on trial in New York. And maybe crypto has suffered enough.In the months leading up to the collapse of Bankman-Fried’s FTX exchange crypto markets tumbled, investment companies fell apart and fortunes were lost. The depths of the so-called “crypto winter” that followed can be seen in new data from Pitchbook, which shows that venture capital investment in crypto companies in September 2023 totalled $508 million, less than a third of what it was in November 2022, the month FTX collapsed.Even a $1 billion fund put together by Binance founder Changpeng Zhao in the aftermath of the meltdown has failed to find companies to invest in, with less than $30 million committed to crypto startups, according to Bloomberg.Like a lot of observers in the cybersecurity community, I’ve been watching news of SBF’s trial for any new information about another, very specific crime carried out in the midst of FTX’s meltdown: On November 11, the same day the exchange declared bankruptcy, unidentified thieves stole more than $400 million of its remaining crypto funds.The culprit remains a mystery. In the meantime, I’ve reported the blow-by-blow story of FTX’s all-night crisis response to that heist, in which the exchange’s staff and bankruptcy consultants scrambled to try to save another $1 billion from being stolen.Ellison’s position at the top of Alameda Research, and her personal relationship with Bankman-Fried, means her testimony will likely be central to the trial.The alleged fraud at the heart of the Department of Justice’s case against Bankman-Fried hinges on the close links between crypto trading company Alameda and crypto exchange FTX. Bankman-Fried cofounded both companies, and the DoJ alleges that FTX used customer deposits to fund Alameda’s bets on the crypto markets. Ellison has already pleaded guilty to fraud and conspiracy charges, and is cooperating with the DoJ.In August, Bankman-Fried had his bail revoked after he allegedly shared Ellison’s private writings with the New York Times, which published a controversial story about her state of mind as her company was spiraling towards bankruptcy.As much as her testimony will be critical for the prosecution, which is trying to prove that the FTX CEO knowingly deceived investors about the state of the business, the courtroom is likely to be packed with reporters hoping that Ellison will reciprocate, and reveal intimate details of Bankman-Fried’s lifestyle and relationships.Welcome to Week TwoWelcome back to our live coverage of the trial of FTX founder Sam Bankman-Fried.Caroline Ellison—onetime Alameda CEO, onetime SBF girlfriend—is set to testify today and it shows. There were over 10 people in line at the courthouse before 6am, including some very dedicated members of the public.The current plan is to finish cross-examination of FTX CTO Gary Wang in the morning and then move on to the star witness, who has already pleaded guilty to fraud and is cooperating with the government. The prosecution previously indicated that it intends to bring in Ellison’s personal documents as part of her testimony, including a note called “Things Sam is Freaking Out About.”The first week of the trial of Sam Bankman-Fried has come to a close. The court is closed Monday for Indigenous Peoples' Day. The trial resumes on Tuesday morning. The next witness? Caroline Ellison.Thanks for reading.Wang’s testimony made clear that Alameda was treated differently in many ways: other companies with a line of credit couldn’t withdraw off the platform and the credit had to be used for collateral but this was not true for FTX. Over time, the line of credit extended to Alameda grew from $1 million to $1 billion to, finally, $65 billion. Other companies who received a line of credit were allowed amounts in the double-digit millions only.The prosecution also pulled up tweets claiming that FTX had a $100 million insurance fund. This, Wang said, was untrue and not a real number. When an account exploited a loophole to post only a little collateral but hold large positions, SBF ordered that Alameda take on that account because FTX’s balance sheets were more public than Alameda’s.By September 2022, Wang said a forthcoming Bloomberg article about the close relationship between FTX and Alameda had SBF sending him and Singh (but not Ellison) a Google Doc with arguments for shutting down Alameda. Wang claimed he pointed out that Alameda actually could not shut down because there was no way of repaying its debt.In November, after the company filed for bankruptcy, Wang accompanied SBF to turn over remaining assets to the Bahamian authorities. SBF had told Wang to ignore legal instructions to not hand over the assets to the Bahamian authorities, Wang claims. Bankman-Fried thought that the authorities in the Bahamas seemed more friendly and were more likely to let him stay in control of the company, Wang added.Today in CourtToday’s session was all Gary Wang and, fitting for a CTO, it was the most technical testimony yet.Wang had already testified yesterday about the special privileges Alameda allegedly enjoyed, such as trading faster, the ability to have a negative account balance, and the $65 billion line of credit. The prosecution showed bits of code and spreadsheets to drive home how exactly this was apparently done.Perhaps most damning was the revelation that director of engineering Nishad Singh had built the “allow negative balance” feature and enabled it for Alameda and Alameda only on July 31, 2019, the exact day that Bankman-Fried was tweeting that Alameda’s “account is just like everyone else’s.”Wang then recounted overhearing a 2019 conversation in which an Alameda trader asked SBF about the borrowing privileges. Bankman-Fried allegedly said it was fine, as long as the amount that Alameda withdrew was less than FTX’s total revenue, which at the time was about $50 to $100 million. Soon, Alameda’s borrowing exceeded FTX’s revenue. Near the end of the year, Wang brought up these concerns to Bankman-Fried, who then asked if he was including the fact that Alameda owned a lot of FTT, FTX’s own tokens.The trial of Bankman-Fried is one of the few crypto stories that has broken through to the mainstream. But crypto folks would rather it hadn’t. They see the FTX saga as a “galactic embarrassment” and the end of the trial as a chance to begin a new chapter.“It’s the stuff of a very juicy story, that’s why it has held everyone’s attention for so long. It’s the gossip we all pretend not to be interested in,” says Noelle Acheson, an independent crypto analyst. “But closure will allow the industry to move on.”The Charges Against SBFBankman-Fried faces a daunting list of thirteen charges, seven of which will be heard at this, the first of two trials.Of the seven, most relate to the ways FTX and Alameda allegedly lied to customers, lenders and investors about the nature of the relationship between the two companies and the use of customer funds:Conspiracy to commit wire fraud on customers of FTXWire fraud on customers of FTXConspiracy to commit wire fraud on lenders to Alameda ResearchWire fraud on lenders to Alameda ResearchConspiracy to commit fraud on customers of FTX in connection with purchase and sale of derivativesConspiracy to commit securities fraud on investors in FTXConspiracy to commit money launderingIn building its charge sheet, says Daniel Richman, professor of law at Columbia University, the government has adopted a “thin to win” approach—including only the minimum amount of information necessary to secure a conviction. The goal, he explains, is to tell a “rich and textured story” that conveys the extent of the fraud, but without overwhelming the jury with technical details. “If you can’t explain in a couple of sentences why all this basically amounts to ripping people off, you’re not going to have an easy trial,” he says.The defense, as we saw in opening statements, will try to undermine this approach by painting a more complex picture. It will spin a yarn about the “liquidity crisis” at FTX, the complexities of Alameda’s “market making” business and the perils of improperly collateralized loans. These nuances are essential to understanding whether Bankman-Fried has engaged in fraud, the defense will argue.A major challenge for both the prosecution and the defense during this trial will be to make very complex and technical ideas understandable. Yesterday, jurors got an explanation of futures trading from FTX CTO Gary Wang:“It’s a—it’s a contract where you can either be—you can either buy it or if you buy—or you can short or sell it, short and at some future—at some particular future date, depending upon what future it is, based on what—so for example, for a Bitcoin future, you would have a—it would be a future on Bitcoin and it would settle at some particular date in the future, and at that future time, whoever shorts the future pays whoever is long on the future, whatever the price of Bitcoin is on that date.”Good luck, jurors.The Trial’s Recurring ThemesIn the first week, witnesses have been asked about a handful of topics whose relevance to the charges against Bankman-Fried might not immediately be apparent. It’s about establishing the character and motivations of Bankman-Fried.Signal and message auto-deletion: The prosecution has emphasized that Bankman-Fried instructed staff to communicate over Signal, an encrypted messaging app that allows messages to be deleted automatically after a certain period. The implication, presumably, is that he knew he had something to hide. But the defense says that the approach was “reasonable.”In traditional finance, practically all internal and external communications must be logged as a legal requirement. But crypto is largely unregulated and the same record-keeping requirements do not yet apply. While a crypto firm like FTX might have the trappings of a regular financial organization, and deal in similar kinds of assets, it’s not a straight comparison.Crypto exchanges and geofencing: In its cross-examination of ex-FTX employee Adam Yedidia, the defense pointed to steps taken by Bankman-Fried to ensure US-based customers couldn’t access the FTX.com platform, which offered riskier types of trading that requires a special license in the US.In doing so, it positioned Bankman-Fried as a responsible steward of FTX, concerned with remaining within the bounds of the law. But it also served to contrast Bankman-Fried with other crypto figures that have found themselves in legal trouble, like Changpeng Zhao, Binance CEO, whose exchange has been accused by US regulators of secretly helping US customers to bypass geo-restrictions.Writing on the WallRead MoreAfter Yedidia, the prosecution brought Matt Huang to the stand. Huang is the founder of Paradigm, a crypto investment firm that took a stake in FTX.Huang spoke to the ways prospective investors were allegedly misled by Bankman-Fried about the relationship between FTX and Alameda, which was also a customer of the FTX exchange. When FTX was pitching for investment Paradigm was “told that there was no preferential treatment for Alameda,” said Huang.But in practice, the prosecution claims, Alameda was exempted from various protections designed to prevent customers from racking up large amounts of debt, increasing the risk of financial trouble at FTX. The implication is that Bankman-Fried defrauded investors by failing to inform them of certain arrangements that might have raised concern.Next up was FTX co-founder and CTO Gary Wang, pictured in the sketch below, right, whose testimony continues today. Wang didn’t have long on the stand before the end of play and the standout exchange came early on:Prosecution: “Did you commit financial crimes while working at FTX?”Wang: “Yes.”Prosecution: “What types of crimes did you commit?”Wang: “Wire fraud, securities fraud, and commodities fraud.”Prosecution: “Did you commit these crimes by yourself or with other people?Wang: “With other people.”Prosecution: “Who were the main people you committed these crimes with?”Wang: “Sam Bankman-Fried, Nishad Singh, and Caroline Ellison.”Gary Wang, cofounder and CTO of FTX, testified for the first time on Thursday, October 5.Illustration: JANE ROSENBERG/REUTERSBefore the morning session gets underway, let’s recap yesterday’s testimony from Adam Yedidia, an ex-FTX developer and long-time associate of Bankman-Fried.Yedidia testified to the lavish conditions in which Bankman-Fried and other FTX employees lived, in a luxury resort in the Bahamas called The Albany. But more importantly, he spoke to the blurriness of the boundaries between FTX and its sibling company, Alameda Research, which served to enable the alleged fraud.He described an arrangement whereby customers depositing funds onto the FTX exchange, unbeknownst to them, had been delivering money to a bank account under the control of Alameda. This arrangement arose because FTX “had trouble opening its own bank account,” said Yedidia, but resulted in a situation in which Alameda effectively owed up to $8 billion to FTX customers.It would later become clear that, instead of holding onto it for safekeeping, Alameda had used the money to repay loans and for various other purposes.Welcome to Day FourWe’ve now reached the end of the first week of the trial. The (dwindling number of) reporters at the courthouse have started a sign-in sheet, after people cutting in line meant that some who arrived early weren’t able to get a spot in the actual room. We have no lunch break today and are ending around 2pm ET, partly to accommodate a juror who needed to reschedule a flight.FTX CTO Gary Wang is up again this morning; if there’s time, we may hear from BlockFi’s Zac Prince or Pinecone’s Elan Dekel but it’s possible the week will end with Wang. Judge Kaplan has been very respectful of the jury’s time so far and we’re unlikely to run late today.There’s no word yet on when the other cooperating witnesses, FTX director of engineering Nishad Singh and Alameda Research CEO Caroline Ellison, will testify.During Yedidia’s cross-examination earlier today, the defense asked him whether living in the Bahamas penthouse was similar to being in a dorm.The prosecution, during their response, showed the court a photo of the penthouse with its airy white furniture and ocean views and asked how the picture “compared to your experience living with the defendant at MIT?” Yedidia’s response? “More luxurious.”That's all for today's live coverage of the trial of Sam Bankman-Fried. We'll be back tomorrow.Judge Lewis Kaplan chastised the defense several times today—particularly during the cross-examination of Adam Yedidia—for asking repetitive questions. At one point, he asked the lawyers to sidebar with him over this issue, at which point a white noise machine was turned on for privacy.The prosecution then brought in FTX CTO Gary Wang, first asking him where he was working a year ago (FTX, naturally) and then immediately asking whether he had committed financial crimes while working at FTX. (“Yes.“)Wang, who has already pleaded guitly on fraud-related charges, recounted his friendship with Bankman-Fried and then reiterated the special privileges for Alameda that SBF had, he claimed, asked him to write into the code: being able to place orders faster, having a negative balance, and the ability to have a $65 billion line of credit. These features—some of which Wang implemented and some which he reviewed—were not publicly disclosed.Wang’s testimony continues tomorrow. The prosecution has indicated that the next witnesses will be Zac Prince, CEO of BlockFi, and Elan Dekel of Pinecone.More Witnesses Take the StandIn today's afternoon session, the prosecution introduced its next witness: Matt Huang, cofounder of Paradigm, which invested more than $200 million in FTX.Huang described meeting SBF and, after discussing investment, being concerned that the company didn’t have a traditional governance structure, and also worried that Alameda Research might enjoy preferential treatment as an FTX customer, such as being able to trade faster. If this were true, he testified, it would erode customer trust in FTX, but he was led to believe that Alameda had no preferential treatment.If you’re looking for a book to read to understand how Sam Bankman-Fried got here, there’s a new release that fits the bill. No, it’s not Michael Lewis’s hotly-anticipated Going Infinite, which doesn’t offer much original insight. It’s Bloomberg reporter Zeke Faux’s Number Go Up, released in September, which manages to be funny, humane, and appropriately skeptical of SBF’s motivations.Number Go Up places Bankman-Fried in his proper context, as one among many colossal weirdos who gambled big in crypto. So much reporting on SBF has focused on the boy-genius narrative, singling him out as a misfit genius whose motives are beyond our understanding. Number Go Up makes a persuasive argument that the story is more straightforward. Sometimes an (alleged) scammer is just a scammer.
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Crypto Trading & Speculation
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A union representing more than 750,000 federal employees warned Wednesday that the House GOP’s proposed cuts to the Social Security Administration for the coming fiscal year would deeply harm the already strained and understaffed agency, potentially forcing it to close offices and slash service hours.
Such impacts would “devastate the agency’s ability to serve the American public,” Julie Tippens, legislative director of the American Federation of Government Employees (AFGE), wrote in a letter to the top members of the House Appropriations Committee.
Last week, a Republican-controlled appropriations subcommittee approved legislation that would cut the Social Security Administration’s (SSA) budget for fiscal year 2024 by $183 million below the currently enacted level. President Joe Biden’s 2024 budget proposal, by contrast, called for a $1.4 billion increase for the agency.
The full House Appropriations Committee still must approve the measure, one of a dozen government funding bills that Congress is looking to pass by September 30 to avert a government shutdown.
Tippens noted that “seniors and disabled individuals already face long lines to get help at field offices” — conditions that would only worsen under the GOP proposal.
“Someone calling SSA’s helpline faces an antiquated phone system that frequently drops their calls and where the average wait time is 35 minutes,” Tippens wrote. “A worker with disabilities trying to claim their earned disability benefit faces a wait time of over seven months to get an initial decision and up to two years or longer to schedule a disability hearing. More than 10,000 Americans die, and another 5,000 Americans are forced to declare bankruptcy, every year while waiting for their disability hearing.”
“More cuts to SSA will result in a rapid increase of wait times, force SSA offices to close in many communities, and reduce service hours to the public,” she added, urging lawmakers to reject the funding reduction.
The GOP’s proposed cuts to the Social Security Administration come after House Speaker Kevin McCarthy (R-Calif.) announced plans to establish a bipartisan “commission” to examine ways to cut Social Security.
Two weeks after McCarthy’s remarks, the 175-member Republican Study Committee released a proposal that would raise Social Security’s full retirement age to 69, a change that would cut benefits across the board.
Rep. John Larson (D-Conn.), a leading proponent of Social Security expansion in the House, warned last week that Republicans’ attack on the Social Security Administration is their “first step” toward cutting benefits.
“Social Security is one thing the American people should be able to count on, yet the House Republican bill would disrupt access to those earned benefits,” said Larson. “Already, years of underfunding, combined with the Covid-19 pandemic, have significantly worsened Social Security Administration’s service, and led to lengthy delays during a time of rising need.”
“The House Republican bill will only pile onto this problem, making it harder and harder for Americans to access their earned benefits,” Larson continued. “I will continue to fight for the Social Security Administration to have the funding and staffing it needs to improve customer service to the American people.”
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Workforce / Labor
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(Photo: Spencer Platt/Getty Images)
1.4 Million Wealthy Americans Are Evading Nearly $66 Billion in Federal Taxes
U.S. Sen. Ron Wyden called on the IRS to further strengthen tax dodging enforcement, including criminal prosecution referrals.
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U.S. Sen. Ron Wyden called on the IRS to further strengthen tax dodging enforcement, including criminal prosecution referrals.
Citing "alarming" data provided by the federal government about the prevalence of tax evasion among the richest Americans, U.S. Sen. Ron Wyden on Thursday called on the Internal Revenue Service to crack down on "particularly brazen" high-income tax cheats and noted that Democratic initiatives have already helped to begin addressing the problem.
Writing to IRS Commissioner Danny Werfel, the Oregon Democrat and chair of the Senate Finance Committee cited data provided by the agency regarding taxes filed from 2017-20.
More than 1.4 million wealthy Americans have still not filed their taxes for those years, Wyden said, with the total amount owed to the federal government reaching "a whopping $65.7 billion"—almost enough to fund a universal childcare program for one year or a universal school lunch program for more than two years.
Nearly 1,000 people who earn $1 million per year or more have yet to file their tax returns, but Wyden wrote that the "most alarming" revelation in the data provided to his committee by the IRS "was the extraordinary amount of unpaid taxes owed by a small subset of ultra-wealthy non-filers," with the 2,000 highest-earning tax dodgers currently owing $923 million.
These high earners, said Wyden have "access to professional advisors and are well aware of their filing obligations with the IRS," but continue to withhold hundreds of millions of dollars that could support food aid, housing assistance, public health efforts, and other federal programs.
"These are people who essentially blow raspberries at the IRS," Wyden toldWashington Post columnist Greg Sargent on Thursday. "They're sophisticated people. They know this is wrong, wrong, wrong. And they do it anyway."
On social media, the senator noted that Republicans in Congress—and those running for president in 2024—aim to drain the IRS of its resources and "[make] it easier for the rich to cheat on their taxes," while Democrats included $80 billion in the Inflation Reduction Act to strengthen enforcement against tax evasion.
With the data provided to the Senate Finance Committee pertaining to 2017-20, wrote Sargent, it "underscores that when the IRS is underfunded, wealthy tax cheats benefit in a big way. An underfunded IRS is what Republicans are advocating for."
After being elected U.S. House Speaker in January, Rep. Kevin McCarthy's (R-Calif.) first action was to propose a repeal of the IRS enforcement funding. Republican presidential candidates including Florida Gov. Ron DeSantis and Sen. Tim Scott of South Carolina have also called for a repeal of the IRA provision, claiming it's an attack on working-class Americans.
But the GOP narrative about IRS enforcement contrasts with the reality, wrote Sargent.
"Unfortunately for Republicans, enforcement funded by [the IRA] has paid off—bringing in more than $38 million from 175 rich tax delinquents, the IRS announced in July," he wrote. "And this month, the agency announced plans to use the funding for still more efforts targeting wealthy tax avoiders."
With tax evasion from previous years still affecting federal coffers, Wyden told Werfel in his letter that the IRS should "initiate enforcement actions against every single millionaire non-filer as part of its ongoing effort to use Inflation Reduction Act funding to restore fairness in tax compliance."
"I also urge IRS to utilize the enforcement tools available to it for instances of willful millionaire non-filers," he added, "including referrals to DOJ for civil or criminal prosecution, liens, and levies."
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Banking & Finance
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WASHINGTON -- Late Tuesday, Fitch Ratings became the second of the three major credit-rating firms to remove its coveted triple-A assessment of the United States government's credit worthiness, a move that spurred debate in Washington about spending and tax policies.
Fitch cited the federal government's rising debt burden and the political difficulties that the U.S. government has had in addressing spending and tax policies as the principal reasons for reducing its rating from AAA to AA+.
Fitch said its decision “reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance” compared with other countries with similar debt ratings.
The downgrade may have little impact on financial markets long-term or on the interest rates the U.S. government will pay. Here’s what you need to know:
HOW DID THE GOVERNMENT GET TO THIS POINT?
Fitch’s move comes just weeks after the White House and Congress resolved a standoff on whether to raise the government's borrowing limit. An agreement reached in late May suspended the debt limit for two years and cut about $1.5 trillion in spending over the next decade. The agreement came after negotiations approached a cutoff date after which Treasury Secretary Janet Yellen had warned the government would default on its debt.
The Biden administration reacted angrily to the move. Yellen said Wednesday that Fitch's "flawed assessment is based on outdated data and fails to reflect improvements across a range of indicators, including those related to governance, that we’ve seen over the past two and a half years."
"Despite the gridlock, we have seen both parties come together to pass legislation to resolve the debt limit," Yellen said.
But Douglas Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office, said that Fitch's decision was the right one, given that there are few efforts in Washington to address the government’s longstanding budget deficit.
“This is about a fundamental mismatch over the long term between our spending growth and our revenue capabilities,” he said.
Standard & Poor's removed its coveted triple-A rating of U.S. debt in 2011, after a similar standoff over the borrowing limit.
Fitch said that the ratio of U.S. government debt relative to the size of its economy will likely rise from nearly 113% this year to more than 118% in 2025, which it said is more than two-and-a-half times higher than is typically the case for governments with triple-A and even double-A ratings.
WHAT TYPICALLY HAPPENS WHEN DEBT IS DOWNGRADED?
Ratings agencies like Fitch and its counterparts, Standard & Poor's and Moody's Investors Service, rate all kinds of corporate and government debt, ranging from local government bonds to debt issued by huge banks.
In general, when an issuer of debt has its credit rating downgraded, that often means it has to pay a higher interest rate to compensate for the potentially higher risk of default it poses.
WHAT COULD THAT MEAN FOR U.S. TAXPAYERS?
Many pension funds and other investment vehicles are required to only hold investments with high credit ratings. If a city or state, for example, sees its credit rating fall too low, those investment funds would have to sell any holdings of those bonds. That would force the government issuing those bonds to pay a higher interest rate on its future bonds to attract other investors.
If that were to happen to U.S. Treasury securities, the federal government could be required to pay higher interest rates, which would push up interest costs for the government and taxpayers.
WILL U.S. BORROWING COSTS RISE?
Few economists think that such an outcome will actually occur. Instead, they think Fitch's downgrade will have little impact. Few pension funds are limited to holding just triple-A rated debt, according to Goldman Sachs, which means the current AA+ from Fitch and Standard & Poor's will be sufficient to maintain demand for Treasurys.
“We do not believe there are any meaningful holders of Treasury securities who will be forced to sell due to a downgrade,” Alec Phillips, chief political economist for Goldman Sachs, wrote in a research note.
Large U.S. banks that are required by regulators to hold Treasurys won't see any changes in those rules just because of the downgrade, Phillips added in an interview, because regulators will still see them as safe investments.
For most investors, U.S. Treasury securities are essentially in a class by themselves. The U.S. government bond market is the largest in the world, which makes it easy for investors to buy and sell Treasurys as needed. The United States' large economy and historic political stability has led many investors to see Treasurys as nearly the equivalent of cash.
Rating agency downgrades typically have more impact on smaller, lesser-know debt issuers, such as municipal governments. In those cases, even large investors may not have much information about the creditworthiness of the bond and are more reliant on the ratings agencies, Phillips said.
Yet that isn’t really the case for Treasury bonds and notes, he said. Large investment funds and banks form their own opinions about Treasury securities and don't rely on the ratings agencies, he said. Fitch’s analysis also didn’t provide much new information, he added. Other entities, such as the nonpartisan Congressional Budget Office, have made similar projections about where U.S. government debt is headed.
“Nobody's holding Treasuries because of the ratings,” Phillips added.
WHAT DOES FITCH MEAN BY ‘GOVERNANCE’?
Fitch cited a decline in “governance” as a key reason for its downgrade, a reference to the repeated battles in Washington over the past two decades that have led to government shutdowns or even taken the government to the brink of a debt default.
“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.
At the same time, Fitch is referring to the inability of even compromise legislation to meaningfully address the long-term drivers of federal government debt, specifically entitlement programs for the elderly such as Social Security and Medicaid.
“There has been only limited progress in tackling medium-term challenges related to rising social security and Medicare costs due to an aging population,” Fitch said.
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Interest Rates
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- Coinbase shares surged 62% in November, their best second-best month since the company debuted on the Nasdaq in 2021.
- The rally came the same month that FTX founder Sam Bankman-Fried was convicted of fraud charges and Binance founder Changpeng Zhao pleaded guilty to criminal charges.
- Analysts at JPMorgan wrote in a report that the emergence of Bitcoin ETFs would likely be positive for Coinbase in the short term but harmful to its business as time passes.
In a month that saw two of the crypto industry's leading figures headed on the path to prison, Coinbase shares rocketed more than 60%, their second-best monthly performance since the cryptocurrency exchange went public in 2021.
For early holders of the stock, the rebound helps ease the pain of 2022, when Coinbase lost 86% of its value as soaring inflation and rising interest rates pushed investors out of crypto and high-growth tech companies, and into assets deemed safer in a recession.
Tech stocks have roared back this year, particularly those tied to the artificial intelligence boom and crypto. Coinbase has the added benefit of having survived the so-called crypto winter, while so many of its rivals disappeared or downsized.
The industry fallout came to a head this month, when Sam Bankman-Fried, founder of former Coinbase rival FTX, was found guilty of seven criminal fraud counts tied to the collapse of his exchange and the theft of customer funds. His conviction landed on Nov. 2 after a monthlong trial.
Less than three weeks later, on Nov. 21, Binance founder Changpeng Zhao pleaded guilty to violations of the Bank Secrecy Act for failing to implement an effective anti-money laundering program and for willfully violating U.S. economic sanctions.
Bankman-Fried, who faces potential life behind bars, is scheduled to be sentenced in March. Zhao's sentencing is set for February. While guidelines suggest a sentence of 12 to 18 months, the Justice Department could push for a lengthier punishment for the Binance founder.
Unlike FTX, which filed for bankruptcy in late 2022, Binance is still standing, though now without Zhao, who agreed to step down as CEO as part of the plea deal. Even before that, the company was seeing a plunge in trading, with volume down by two-thirds between the first and third quarters of the year, according to crypto analyst site CoinGecko.
With assets of more than $65 billion on the platform, Binance remains the world's largest crypto exchange globally. But its market share fell from over 60% in February to under 50% in September, "an indication that the exchange may be losing its grip on the industry as regulators continue to pressure it," CoinGecko said.
In the first 24 hours after the Justice Department announced its $4.3 billion settlement with Binance, customers pulled more than $1 billion from the exchange. Liquidity also dropped 25% in the immediate aftermath of the announcement as market makers pulled back their positions, according to data provider Kaiko.
A Binance spokesperson told CNBC in a statement that Zhao appeared in court "to protect our users and to ensure the longevity of our company."
"Binance's resilience has been tested unlike any other exchange around today," the spokesperson said. "Yet, we continue to operate the world's largest cryptocurrency exchange by volume. In fact, we currently see a climbing percentage of institutional user transactions."
Coinbase is the fourth-biggest global exchange by daily volume, according to CoinGecko. It's the only one that's publicly traded in the U.S. and has a market cap of close $30 billion.
In a report to clients on Wednesday, analysts at Mizuho noted that Coinbase shares are up about 20% since Zhao's settlement, a rally that's likely "in anticipation of potential share gains for COIN in wake of outflows from Binance, the industry's largest exchange," they wrote. Coinbase shares fell 2.4% to $124.72 on Thursday, wiping out some of their recent gains.
Mizuho raised its price target on the stock to $35 from $31, while keeping its underperform rating, which it's maintained since December.
A Coinbase spokesperson declined to comment for this story, but CEO Brian Armstrong told CNBC's Joumanna Bercetche earlier this week that the Binance settlement allows the crypto industry to move past a spate of scandals.
"The enforcement action against Binance, that's allowing us to kind of turn the page on that and hopefully close that chapter of history," Armstrong said. "I think that regulatory clarity is going to help bring in more investment, especially from institutions."
Both Coinbase and Binance still face legal battles with the Securities and Exchange Commission, which was noticeably absent from the Binance settlement. Meanwhile, Coinbase executives have floated the idea of leaving the U.S. altogether for a jurisdiction with hard-and-fast rules on crypto, should the company be unable to come to a resolution with the SEC.
Wall Street appears to be shrugging off that concern.
Analysts at Needham, who recommend buying Coinbase shares, wrote in a report on Nov. 21 that the company "exited the crypto 'winter' better positioned than in the prior up cycle." They also noted that in addition to FTX's failure and Binance's retreat, crypto trading platform Bittrex has also exited the market.
Bittrex said on Nov. 20, that effective Dec. 4, "all trading activity on Bittrex Global will be disabled," and it encouraged customers "to log into their account and withdraw assets as soon as possible." In April, the SEC charged Bittrex and its ex-CEO with operating an unregistered exchange.
Yet there may be a new competitive threat on the horizon.
U.S. regulators are expected to soon approve the first U.S. spot bitcoin exchange-traded funds, which would allow investors to buy into digital currency directly through the same mechanism they use to buy stock and bond ETFs. Top asset managers, including BlackRock, WisdomTree and Invesco, have filed applications with the SEC.
Regulatory approval would open up many more avenues for people to buy bitcoin. While Coinbase allows investors to buy a variety of cryptocurrencies, bitcoin accounted for 38% of transaction volume in the third quarter and almost the same percentage of revenue. For casual investors who just want some exposure to bitcoin, there will potentially be additional ways to buy, including through their primary online brokerage.
JPMorgan Chase analysts wrote last week that crypto ETFs would likely be good for Coinbase in the short term but more problematic as time passes.
The initial boost would come from custody revenue tied to the ETFs. Most of the big asset managers jumping into market, including BlackRock, Franklin Templeton and WisdomTree, have picked Coinbase for custody services, which involves the storage and safekeeping of the assets.
However, the longer-term concern, according to JPMorgan, is that fewer people will need Coinbase accounts, leading to pricing pressure.
"We see many novice investors never going beyond these flagship tokens and thus never needing the services of a Coinbase," wrote the analysts, who have a neutral rating on the stock and an $80 price target. "We also see the ETF markets as more transparent, efficient and lower cost to execute and we see the potential for a migration to ETFs for cheaper exposure and trading driving Coinbase to lower fees."
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Crypto Trading & Speculation
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Coinbase Global (COIN) said it received regulatory approval to offer US retail customers regulated crypto futures in the coming months, sending its stock up as much as 5% before the market open on Wednesday.
The country’s largest crypto exchange said it secured the permission from National Futures Association (NFA), a self-regulatory organization designated by the Commodities Futures Trading Commission (CFTC).
The approval comes as Coinbase squares off against the Securities and Exchange Commission in court in the Southern District of New York. The federal securities regulator has alleged that Coinbase is operating as an unregistered securities exchange, broker and clearing agency.
The case will likely boil down to whether certain crypto assets should be considered securities or commodities in the US. Earlier this month, Coinbase asked a US judge to dismiss the lawsuit, arguing that the cryptocurrencies sold through its exchange are more like baseball cards than investment securities.
Its stock is up 123% year to date, despite the SEC lawsuit, but it has fallen since reporting earnings earlier this month.
Coinbase filed for approval to offer regulated crypto products shortly after its IPO two years ago. In 2022, it acquired CFTC-regulated futures exchange FairX, now rebranded to Coinbase Derivatives Exchange.
The company has since launched trading in bitcoin and ether futures for institutional investors. Earlier this year, it also announced plans to spin out a derivatives platform for non-US citizens.
Thew new approval from the NFA to offer crypto futures to US investors "is a significant milestone for bringing federal regulatory oversight over the crypto markets," Coinbase’s chief policy officer Faryar Shirzad said in a statement.
Greg Tusar, vice president of institutional product at Coinbase, said in a blog post that Coinbase is the first crypto-only platform to offer regulated crypto futures products and spot crypto trading US investors.
“Access to a CFTC-regulated crypto derivatives market is essential to unlocking significant growth and enabling broader participation in the cryptoeconomy,” Tusar added.
In the coming months, Coinbase will provide US customers with more information on how they can access the platform’s futures products.
Derivatives products allow investors to use leverage to make investments with less upfront investment than trading spot crypto. Investors can also use futures products to take long or short positions on a cryptocurrency's future performance. The Chicago Mercantile Exchange (CME) already offers bitcoin and ether futures.
Derivatives products also play an essential way for crypto trading venues to not only attract customers and earn higher revenues but also control a higher share of the industry’s total trading volume.
The global crypto derivatives market represents approximately 75% of crypto trading volume worldwide.
In past years, so-called offshore exchanges such as Binance, the world’s largest crypto exchange, and the now bankrupt FTX managed to take market share from Coinbase by offering traditional futures as well as more popular perpetual futures and options trading.
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Crypto Trading & Speculation
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Oh dear. It seems that Auntie has done it again. This time it’s the row over Nigel Farage’s bank account, with the Brexiteer revealing at the end of last month that his Coutts account had been closed with ‘no explanation.’ Farage suggested that this was for political reasons but a week later, the BBC offered up a different explanation. Business Editor Simon Jack fired off an eight-tweet thread on 4 July, citing anonymous sources who suggested that Farage had merely fallen ‘below the financial threshold required to hold an account at Coutts.’
Jack grandly claimed that ‘people familiar with the matter’ had rejected the notion that the decision to close his Coutts account was in any way political. He cited one unnamed source as claiming ‘it was for commercial reasons – the criteria for holding a Coutts account are clear from the bank’s website.’ No mention at all that political considerations had played a role in the decision to close Farage’s account. Scores of self-identifying ‘sensibles’ duly swallowed the bank’s spin, hook, line and sinker. Among them was ex-Beeb grandee Jon Sopel, who sneered a fortnight ago that:
You must feel a bit of a Charlie if you’re Nigel Farage, and you claim that it’s all an establishment stitch up that your account’s been closed when it’s just you’re not rich enough for Coutt’s. Am thinking of starting a ‘go fund me’ page for Nige to get him his account back
So it must be to some considerable embarrassment over at the BBC’s headquarters that Farage has now obtained a 36-page document from Coutts via a Subject Access Request, rebutting Jack’s claims. The bank’s wealth reputational risk committee openly discussed in November that they ‘did not think continuing to bank NF was compatible with Coutts given his publicly-stated views that were at odds with our position as an inclusive organisation.’
What was Simon Jack’s response? To blandly tweet out the Coutts’ statement claiming that ‘Our ability to respond is restricted by obligations of client confidentiality.’ Those, er, would be the same obligations that they appear to have breached when they briefed the Beeb that the bank closure was ‘for commercial reasons.’ Sounds like the reputational risk committee could do with some reputational risk management…
The BBC meanwhile has blamed the Financial Times in their most recent article for getting the story wrong – no accountability here guv’nor. They are also yet to issue a correction to their original article which is still headlined ‘Nigel Farage bank account shut for falling below wealth limit.’
One for BBC Verify to investigate perhaps…
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Banking & Finance
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Britain’s second-biggest city effectively declared itself bankrupt on Tuesday, shutting down all nonessential spending after being issued with equal pay claims totaling up to £760 million ($954 million).
Birmingham City Council, which provides services for more than one million people, filed a Section 114 notice on Tuesday, halting all spending except on essential services.
The deficit arose due to difficulties paying between £650 million (around $816 million) and £760 million (around $954 million) in equal pay claims, the notice report says.
The city now expects to have a deficit of £87 million ($109 million) for the 2023-24 financial year.
Sharon Thompson, deputy leader of the council, told councilors on Tuesday it faces “longstanding issues, including the council’s historic equal pay liability concerns,” according to the United Kingdom’s PA Media news agency.
Thompson also blamed in part the UK’s ruling Conservative Party, saying Birmingham “had £1 billion of funding taken away by successive Conservative governments.”
“Local government is facing a perfect storm,” she said. “Like councils across the country, it is clear that this council faces unprecedented financial challenges, from huge increases in adult social care demand and dramatic reductions in business rates incomes, to the impact of rampant inflation.”
“Whilst the council is facing significant challenges, the city is very much still open for business and we’re welcoming people as they come along,” she added.
A spokesperson for UK Prime Minister Rishi Sunak told reporters on Tuesday: “Clearly it’s for locally elected councils to manage their own budgets.” The spokesperson added that the government has been “engaging regularly with them to that end and has expressed concern about their governance arrangements and has requested assurances from the leader of the council about the best use of taxpayers’ money.”
The council’s leader John Cotton elsewhere told the BBC that a new jobs model would be brought into the council to tackle the equal pay claims bill.
The multicultural city is the largest in central England. It hosted last year’s Commonwealth Games, a major sporting event for Commonwealth countries, and is scheduled to hold the 2026 European Athletics Championships.
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United Kingdom Business & Economics
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Reliance Consumer May Stop Direct Supply Of Campa Beverages To Udaan — BQ Exclusive
This comes a day after Udaan released a statement, saying it has entered into a partnership with Reliance Consumer.
Reliance Consumer Products Ltd. is likely to have halted supplying its Campa range of beverages directly to business-to-business e-commerce platform Udaan, according to the apex FMCG distributors' body.
"We contacted the top management of Reliance Consumer, who apprised us that it has not signed Udaan as national distributors for soft drinks brand—Campa," Dhairyashil Patil, president of the All India Consumer Products Distributors' Federation, told BQ Prime.
"It was an issue at the local level and Reliance has already asked the team to immediately stop the current dispatches of Campa to Udaan," Patil said.
Reliance Consumer and Udaan are yet to respond to BQ Prime's queries.
Reliance Consumer will always prioritise traditional distributors and after that, if some stock is left, then they might consider giving it to other large players like Udaan, according to a person with knowledge of the matter, who spoke on condition of anonymity.
This comes a day after Udaan released a statement, saying it has entered into a partnership with Reliance Consumer for pan-India distribution of beverage brand Campa's range of products.
Under this partnership, Reliance has made available three new Campa flavours—cola, orange and clear lime—under various consumption ranges and price points.
"The large retailer base combined with a cost effective distribution network places Udaan in a unique position to serve the needs of RCPL for deeper market penetration for the 'Campa' range across Bharat," said Vinay Shrivastava, head for FMCG business, Udaan.
The Campa beverages will be initially available in over 50,000 mom-and-pop stores, which will gradually expand to over 1 lakh retailers and grocery stores in the next two months, the Bengaluru-based unicorn startup said.
Udaan said it would work on various retailer promotions to drive expansion of Campa and increase the buyer base on the platform.
The company has launched Project Vistaar to expand the fast-moving consumer goods and food category by tapping into the rural area. Udaan claims to be reaching rural markets up to a population of 3,000 under the project, which is currently being implemented in rural Uttar Pradesh.
"The company aims to expand its reach to over 10,000 towns and villages in the next 10–12 months," Udaan said.
In 2022, the company said it shipped over 1.5 lakh tonne of FMCG products, with a large volume of orders for the products coming from Uttar Pradesh, Delhi, Karnataka, Maharashtra, and Telangana.
According to another person familiar with the matter, who spoke on condition of anonymity, it would be surprising if Reliance prioritises any other platform over traditional distributors, which is the backbone of India's retail trade.
If new-age platforms like Udaan start supplying to retailers, that too on cheaper terms, then it amounts to undercutting, souring the partnerships with existing distributors. And no companies will want to do that, given that the general trade accounts for a bulk of FMCG sales, according to the person.
Over the past several months, the traditional distributors have had a rub with consumer goods companies that have added a stream of revenue by partnering with e-commerce players, who directly buy the products from the companies instead of buying it from a distributor.
While this gives e-commerce players a pricing and discounting power, distributors have alleged that the e-commerce players are latching on to deep discounting, thus creating a dent on their revenues.
Amul and Parle Products had also earlier stopped supplying stocks directly to Udaan, alleging that Udaan was monopolising distribution to retailers.
Earlier, Udaan had filed complaints with the Competition Commission of India against Parle Products Pvt. and Britannia Industries Ltd. on different occasions as the consumer goods makers refused to supply their products directly to the startup. The national competition regulator, however, dismissed both the pleas, citing lack of objective justification.
The coronavirus lockdowns disrupted the $110-billion FMCG industry, impacting the channels of distribution and store-level inventory. Since then, firms like Hindustan Unilever Ltd., Nestle Ltd., Marico Ltd. and Dabur India Ltd. have been adding direct distributors to expand the reach in underpenetrated markets.
"The traditional distributors, some of whom have been doing business for three generations, have built a significant infrastructure to reach a large number of outlets," Patil said. "This offers them an edge over newer firms, such as Udaan, who may not have the same amount of reach."
The general traders have a distribution strength of 80 lakh outlets across the country, Patil said. This compares with Udaan's network of 30 lakh grocery stores, retailers, pharmacies, hotels, restaurants and catering, and others.
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Consumer & Retail
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