TheChek News Flow

Patrick Pouyanné says a return to ‘wild west’ would provoke backlash for oil and gas companies

TotalEnergies’ chief executive has urged Donald Trump not to axe climate rules if he wins the election, warning that taking a “wild west” approach to regulating fossil fuels would provoke a backlash against the oil industry.

Patrick Pouyanné told the Financial Times that if the former US president pressed ahead with pledges to tear up rules governing methane and other emissions it would torpedo the sector’s reputation and fuel opposition.

“I prefer to have good regulations in the US, for example, in methane I prefer the EPA [Environmental Protection Agency] to be stringent . . . I am not in favour of the wild west,” he said.

“My view is that this will not help the industry, but on the contrary it will demonise, and then the dialogue will be even more antagonised.”

The comments from Pouyanné, whose France-based company is one of the biggest global oil producers, come as the industry considers the implications of a possible Trump victory over Kamala Harris in Tuesday’s US presidential election.

Trump has pledged to “rescind every one of Joe Biden’s industry-killing” regulations and withdraw from the 2015 Paris agreement — steps he says will “unleash American energy”, which is already at record levels of production.

The oil industry has been an important source of fundraising for the Republican candidate as many executives oppose environmental restrictions that they say will hinder investment. A handful have publicly endorsed him, including Harold Hamm, the billionaire founder of Continental Resources.

In private, however, many leaders have expressed reservations about Trump’s policies, including plans to impose punishing tariffs on imports and gut the Inflation Reduction Act, Biden’s signature climate legislation.

Even if he wins the presidency, much of Trump’s ability to enact his plans could be limited by Congress and the courts. Some industry leaders expressed scepticism that the regulatory bonfire would come to pass.

“I think there’s a very low likelihood the US becomes a wild west of deregulation,” said Mike Wirth, chief executive of US supermajor Chevron.

He told the FT: “Based on 42 years in this industry, I’ve seen regulation move in one direction. Sometimes it moves faster, sometimes it moves slower, but I don’t think that we’re at risk of some sort of chaotic outcome of a deregulatory period of time.”

Trump has been particularly scathing about the IRA, which he has dubbed the “green new scam”, vowing to rescind all unspent funds issued under it.

But oil companies including Chevron and US rivals ExxonMobil and Occidental Petroleum are tapping into the $370bn in green tax breaks and subsidies available through the legislation to support investments in technologies including hydrogen and carbon capture and do not want the law repealed.

Some executives are hoping the flow of the majority of IRA funds into Republican congressional districts would prompt Trump’s party to temper his ambitions to kill it.

“There’s a lot in the IRA that’s helping to support projects across the country, which also helps to support economic growth and job growth,” Kathy Mikells, Exxon chief financial officer, told the FT. “That gives a lot of people a lot of incentive to stand behind the IRA.”

Biden’s regulatory agenda would be easier to unpick, however, including tough new rules and penalties forcing the industry to curb methane leaks.

Most larger oil companies are investing in new technology to limit emissions of the planet-warming gas and have backed global efforts to slash them by at least 30 per cent by 2030 from 2020 levels.

But many smaller operators are opposed to the rules, arguing they lack the financial firepower to adhere to them, and want Trump to repeal them — as he did with regulations introduced by Barack Obama during his first term.

Pouyanné said such a move would leave the industry exposed to attacks by climate groups and give the industry “again a bad reputation”.

Oil companies had accepted environmental rules in the past covering greenhouse gas emissions, air and water quality and should do so again and face up to the challenge of climate change, he said.

In 2021 Total quit the American Petroleum Institute saying the French group’s climate policies — support for the Paris agreement and belief in carbon pricing — did not align with those of the industry lobby group.

“We can produce fossil fuels with lower emissions and we have the technology,” he said. “I count on my large and big US peers to convince the rest of the industry.”

AI data centre demands and renewable energy’s dispersed nature are driving equipment orders for power grid upgrades

The world’s largest producer of transformers has warned its industry is “overwhelmed” and unable to meet exploding demand for grid equipment, threatening delays to vital infrastructure projects that would boost the share of renewable energy across the globe.

Andreas Schierenbeck, chief executive of Hitachi Energy, a rapidly growing division at the heart of Japan’s third-most valuable public company, said transformer manufacturers would be hard-pressed to boost output quickly enough to meet demand to upgrade grids, with supplies strained by the growing needs of data centres used for generative artificial intelligence.

“Ramping up capacity is definitely an issue. It’s not easy and it will probably not ramp up fast enough,” he told the Financial Times. Schierenbeck warned that utilities’ projects would be delayed and existing infrastructure’s lifetime would have to be extended. “Everybody is overwhelmed by the demand.”

Transformers are vital to change the voltage of electricity to enable power to flow efficiently from power plants to end users and can be the size of a house, weighing between 400 and 500 tonnes. Making them is labour-intensive and requires specialised winding machines that take years to source. Manufacturers are also cautious about overinvesting.

Bolstered by a takeover of ABB Power Grids in 2020 that valued it at $11bn, Hitachi Energy has become a key growth engine for the Japanese group. The unit aims to increase revenues by $1bn-$2bn each year to reach $30bn around 2030, up from $13bn at present.

Transformers had long been readily available within six to eight months when manufacturers suffered from a glut for years, but demand in the $48bn market has suddenly rocketed. Its size is expected to reach $67bn by 2030, according to estimates by consultancy Rystad Energy.

Utilities wanting to buy the key piece of electrical infrastructure would now have to wait three to four years if they have not reserved one already, said Schierenbeck, formerly CEO of German energy company Uniper.

The supply chain bottleneck is another pinch point for power systems struggling with surging growth in electricity generation and ageing infrastructure.

In particular, the expanding share of renewables in the electricity mix in some markets requires more transmission equipment because they are often located far from users and produce power from more dispersed sources than traditional electricity plants.

That has created an urgent need to upgrade the grid to tackle huge waiting lists for new projects to connect to networks, as regulators struggle to cope with the major power system overhaul that decarbonising requires.

“The transformer industry is experiencing unprecedented strain,” said Edvard Christoffersen, senior supply chain research analyst at Rystad Energy. He estimated that prices had risen by 40 per cent since 2019 and that the supply crunch would last until at least the end of 2026.

“Power transformers are currently the most severely undersupplied critical power grid equipment,” he added.

The US National Renewable Energy Laboratory warned this year of an “unprecedented imbalance between supply and demand” for distribution transformers, while the US President’s National Infrastructure Advisory Council called the shortage “critical” in another report.

Hitachi Energy is investing $6bn and will hire 15,000 more people to expand production capacity and boost other key services for the grid over the next three years, with all new output already pledged to customers.

Schierenbeck dismissed the likelihood of the industry tipping into overcapacity any time soon, adding it would take a long time before Chinese competitors became a threat, despite exports from China starting to surge.

“Building a new factory takes four years from the ground [up] and so we cannot really build it faster than the market,” he said, adding that the Chinese were “not exporting, because it’s built for their own purposes”.

The trading firm is pushing frontiers in markets once dominated by banks — but is not yet regulated like one

In July, Ken Griffin paid a record $45mn for a near-immaculate 11-foot tall stegosaurus skeleton called “Apex” — a fitting purchase for a billionaire that many consider the apex predator of finance.

In a Sotheby’s press release announcing the sale, Griffin said: “Apex was born in America and is going to stay in America”. It was a heavy hint of Republican-supporting Griffin’s thinly-veiled political ambitions, which are being bankrolled by his estimated $43bn fortune.

The two companies to which he owes that wealth have similarly gargantuan aspirations — but no such geographical sensitivities.

Griffin made his name through his hedge fund Citadel, now the most profitable investment firm in the industry’s history. But a larger chunk of his Forbes-calculated net worth actually comes from Citadel Securities — valued at $22bn when venture capitalists Sequoia and Paradigm bought a small stake in the market maker two years ago.

Citadel Securities is at the forefront of a new breed of trading firms that have eaten away at the traditional dominance of big banks.

In just two decades it has become the world’s biggest buyer and seller of stocks in the United States; in August, more equity trading was conducted within its electronic ecosystem than on the New York Stock Exchange’s main market.

Last year it generated profits of $2.8bn on net revenues of $6.3bn. In the first six months of this year alone, it made $4.9bn in net revenue.

A firm that already handles one in four US equity trades and is a major player in Treasuries has now set its sights on new targets: among them China’s vast but politically sensitive equity market, the European government bond market, and the hitherto bank-dominated world of corporate fixed income trading.

It is unlikely to settle for becoming a minor player in any of them. “We don’t enter a business just to make a little money. We enter a business to be number one. Every single time,” said Matt Culek, Citadel Securities’ chief operating officer.

It is that success which has bred a new set of challenges for future growth, according to dozens of interviews with insiders, competitors and analysts, as watchdogs have begun to scrutinise more closely how risks have shifted from traditional banks to their non-bank rivals since 2008 — and whether regulation now needs to catch up.

“The key risk is that the regulator looks at the likes of Citadel Securities and Jane Street, sees the risk there and then decides to regulate them like a bank,” said a top executive at a major bank. “Then you go from an infinite return on equity business to a mid-teens [one].”

Citadel Securities was first set up inside Griffin’s hedge fund Citadel in 2002, as markets were migrating from trading pits to server rooms.

While the hedge fund succeeded because of Griffin’s deft understanding of convertible bond markets, Citadel Securities rode the wave of the electronification of markets to become one of the largest market-makers in the world.

In simple terms, market-making involves quoting buy and sell prices simultaneously for a stock, bond, or derivative and profiting from small differences in prices.

In its early days, Citadel Securities focused on equities and options, deploying mathematical prowess and computational power to price securities quickly and accurately. But the upheaval of the crisis of 2008 helped create a new financial order — one that was the perfect environment for Citadel Securities.

That year was a moment of divergence for Griffin’s two firms: a near-death experience for the hedge fund and a stellar year for Citadel Securities which was spun out, as investment banks retreated, liquidity vanished and volatility soared, allowing market-makers to collect a huge premium for their services in the panic.

The European business of Citadel Securities made almost $461mn in trading income that year, filings show: a feat that it would not repeat in the next decade.

Griffin split the businesses and the two have operated separately ever since — to a point. Front office staff act independently, with separate management, trading and technology teams, and Griffin now has only a non-executive role at Citadel Securities. Beijing-born Peng Zhao, a Citadel Securities lifer, has served as chief executive since 2017.

But both firms remain owned by Griffin, are housed under the same roof in both London and New York, and share teams in operations, trade financing, and treasury management.

Citadel Securities bridles at any insinuation that the businesses are not entirely separate. “It’s no different to Goldman Sachs Asset Management and Goldman’s markets business,” one insider said. However, employees are under no illusions of Griffin’s influence on a culture that is said to be more competitive, corporate and hierarchical than many of its rivals.

“When you put up numbers you will be well rewarded. When you don’t you will be shot. It’s very simple,” said one former Citadel Securities employee.

Citadel Securities said that it “attracts exceptionally bright and motivated professionals capable of solving the world’s most complicated financial problems” and that it “expects and rewards excellence from those who contribute to our mission of delivering a superlative experience for [its] clients.”

Citadel Securities used its independence to build a business that is simultaneously a trading partner, client and rival to the trading firms, hedge funds and banks it deals with.

At the core of the Citadel Securities model is order flow. It uses the information from the $450bn worth of trades it executes every day to power its predictive analytics — the product of spending hundreds of millions a year on hard tech and quantitative research, according to one insider — and estimate the fair value of equities and options in all market conditions.

The reams of data also supply the material for its proprietary trading business: something that insiders say is now a significant profit centre for the firm. The firm says it makes the trades it executes publicly available.

Citadel Securities’s pricing is ultra-competitive and margins in the business are slim. Market making is, according to the founder of one of Citadel Securities’ principal rivals, Doug Cifu of Virtu, a business of “hitting singles”.

“We don’t try to hit doubles or triples or home runs. It’s really, really hard to be a consistent singles hitter,” Cifu said.

Competitive pricing attracts more flow, even from rivals. “The truth is, they have some of the best pricing in the business; how they do it I don’t know,” said an executive at one of the world’s biggest hedge funds. The head of a rival trading firm said: “We trade with them a lot and begrudgingly respect them.”

Flow also comes from the explosion in retail trading spurred by the sums Citadel Securities and its rivals pay brokers to send the firms their trades: $509mn in Citadel Securities’ case paid to Robinhood, Charles Schwab and ETrade in the past year, regulatory filings show.

“Payment for order flow” is banned in the UK and the European Union. Griffin has professed ambivalence about whether the practice is outlawed in the US, pointing out that it is a substantial cost. But the payments to brokers have secured vast flows for the likes of Citadel Securities and allowed the trading firms to carve up the retail trading sector between them.

More than 90 per cent of easier to execute retail orders were split between market makers who paid for flow in 2022, according to the SEC, and over a third of US-listed retail volume is executed through Citadel Securities’ platform, according to its website.

Firms are bound by rules to secure the best price for customers, and proponents say the practice has supported zero commission trading. But opponents argue there are hidden costs embedded in payment for order flow, partly due to how the segregation of the market reduces competition. Even in the US, regulators have mused on the informational advantages players such as Citadel Securities gain from the order flow.

“They will tell you that you can trade for free on Robinhood or Ameritrade, but as Milton Friedman always said there is no such thing as a free lunch,” said the head of a rival trading firm.

Citadel Securities is now applying the lessons from equities trading to other markets.

“Our success was built on exchange market making. Now we are leveraging these historical strengths to be Citadel Securities in more places,” said Jim Esposito, who was recently poached from Goldman Sachs to be the trading firm’s president.

“This means more product and geographic diversification. The number of potential growth opportunities feels almost boundless.”

One such diversification is selling a service that would allow the likes of mid-sized banks to keep their relationships with clients but let Citadel Securities handle the actual trading, and open up a new source of trading flow that has so far been out of reach.

That would represent a partnership with banks. But other opportunities would represent a more direct competition: among them the $11tn US corporate bond market, a vast but inhospitable business traditionally built on relationships.

The challenge in credit markets is that they are made up of hundreds of thousands of unique securities, making trading in them far harder to truly automate than equities.

Because of that, corporate debt has long been dominated by big investment banks such as JPMorgan and Goldman Sachs which built huge franchises based on big balance sheets and shared history.

“The global investment banks have direct relationships with corporate clients like big infrastructure companies that are large repeat bond issuers,” said Chris Concannon, chief executive of electronic trading platform MarketAxess.

Attempting to take on the investment banks on that turf is akin to “going from playing home games in equities to playing away games in fixed income,” said one executive at a large US bank.

Citadel Securities and its rivals see an opening, however.

Average trade sizes are coming down, volumes are rising and speeds are increasing — just like what happened in equities two or three decades ago. Algorithmic trading is on the rise. Jane Street, a major competitor to Citadel Securities, has already made inroads into credit trading thanks to its dominance of exchange traded funds that invest in bonds.

“Citadel and others have a real expertise in anonymous market-making from equities, and they are sophisticated around machine learning,” said Billy Hult, chief executive of Tradeweb.

That may mean that trust and relationships are less of a factor. “Big asset managers are more willing to entertain shifts in market structure and worry less about who is on the other side of their trade,” Hult added.

Citadel Securities is also gaining traction with corporate America, Esposito said. “Every corporate CEO and CFO wants to have a dialogue with Citadel Securities. They obsess about what’s driving the change in their company’s stock price.”

If every corporate CEO wants to rub shoulders with Citadel Securities, the firm itself has bigger ambitions — starting with its founder.

Griffin has ramped up his involvement in US politics. The billionaire has donated more than $100mn to Republican candidates, previously backing figures such as Florida governor Ron De Santis’s re-election campaign and Nikki Haley’s run to become the Republican presidential nominee.

The Florida native shifted the headquarters of his two firms from their founding city of Chicago to Miami, criticising Democrats’ governance of the Windy City on the way out.

He has become increasingly outspoken on political issues too, calling Harvard students “whiny snowflakes”, criticising the Chicago school his children attended for “indoctrinating” them with “woke” ideology, and lamenting President Biden’s economic agenda.

At the Knight-Bagehot gala dinner in New York City last month, he hinted at a presidential run.

“I would never say no to the possibility of being involved in our government,” he said. “I don’t think 2028 is that moment in my life.”

Griffin’s willingness to openly engage in politicking to achieve his goals — whether it be lobbying or diplomacy — also marks Citadel Securities out from some of its low key rivals.

When Xi Jinping welcomed a select delegation of US business executives in March to the Great Hall of the People in Beijing, among the executives hobnobbing the Chinese president were Blackstone supremo Stephen Schwarzman, FedEx president Rajesh Subramaniam and Mark Carney, former head of the Bank of England and now chair of Bloomberg LP.

Standing discreetly far to the left of the official portrait was someone who needed no translator, however: Citadel Securities’ chief executive, Peng Zhao.

Accessing China’s $12tn stock market is high on the firm’s agenda.

It is a country where Citadel Securities has had its share of setbacks. In 2015, Chinese regulators froze a Shanghai-based Citadel Securities’ trading account until 2020 as part of a broader probe over market manipulation and short sellers.

Earlier this year, Citadel Securities failed in its bid for Credit Suisse’s China securities unit, an acquisition that would have granted it licences to offer brokerage services locally.

For now, the firm has a small team in Shanghai which supports its offshore China business. But rivals say Citadel Securities has been canny about laying the groundwork for eventual approval.

“They were persona non grata for a period of time . . . just keeping their heads down,” said one person familiar with the firm’s lobbying efforts. “[But they] never miss an opportunity to make a pitch.”

Across the industry there are expectations that the status quo, which has allowed companies like Citadel Securities to expand into banks’ territory without having to deal with many of the regulations that constrain them, is unlikely to remain.

At the end of last year, US regulators updated their old playbook for regulating large non-bank institutions, previously used on sprawling insurers like Prudential, MetLife and AIG.

SEC chair Gary Gensler has shown considerable appetite for regulating firms including hedge funds and trading groups.

If there are any major market upsets caused by a rogue trading algorithm for instance, it could impact confidence in markets.

“There is a history of algos going haywire,” said a senior prime broking executive at a bulge bracket bank. “There is a lot of risk moving out of banks to sectors that aren’t as closely regulated and that seems to be a gap.”

Citadel Securities does not see it like that, however.

It emphasises its registration as a broker-dealer, like other banks, and its oversight by regulators including the SEC and CFTC. It argues it has been a force for transparency in the industry through the reporting of its trades to regulators and the wider market.

It does not anticipate a regulatory crackdown. And public records show the efforts it has expended on meeting the regulators who might impose one.

When Gensler took office in 2021, Griffin secured a meeting with the SEC chair before the chief executives of Citigroup, Bank of America, Goldman Sachs or Morgan Stanley.

The joint lobbying team the firm shares with Citadel met Gensler 18 times in three years, significantly more than any of its close rivals, and rivalling the number of meetings of the country’s bulge-bracket banks.

Nonetheless, as the firm has grown, so has its potential impact on the wider financial system — not least because Citadel Securities and its peers use banks to facilitate derivatives trading. When the family office Archegos defaulted on derivatives trades in 2021, it caused billions of dollars in losses to banks including Credit Suisse, Morgan Stanley and Nomura.

“If one of them [the large market makers] goes down, the whole system will be impacted, just like a bank,” said a senior prime broking executive at a large US bank, which lends to market makers including Citadel Securities.

“We saw Archegos go down . . .[and its] importance to the [financial] system, to the marketplace, was not even close to Citadel.”

Energy major and prospective buyer in lobbying drive to overcome regulator’s objections to $1.3bn deal

Shell is battling to win approval for the $1.3bn sale of its onshore oil and gas business in Nigeria after the divestment was blocked by regulators.

The company and the proposed buyer Renaissance Africa Energy were informed by the Nigerian Upstream Petroleum Regulatory Commission in August that the deal could not be approved in its current form, according to people familiar with the matter.

Both parties have since engaged in an intense lobbying effort but have failed to persuade the regulator to reverse course, the people said.

NURPC’s chief executive, Gbenga Komolafe, announced last month that the sale of Shell Petroleum Development Company of Nigeria (SPDC) to Renaissance did “not scale [the] regulatory test”.

In an interview with the Financial Times, Shell chief executive Wael Sawan said talks with the regulator were ongoing.

“What we continue to see is a regulator that is engaging with us to be able to get the assurances that any regulator requires to be able to bless the transaction and that’s what we’re trying to provide to them,” he said.

In the past two years companies including Exxon, Eni, Equinor and China’s Addax have announced plans to divest their Nigerian onshore assets, but Shell’s exit was always likely to face the most scrutiny. Shell drilled Nigeria’s first successful oil well in 1956 and SPDC is the biggest oil company in the country.

It operates a joint venture with the Nigerian National Petroleum Company, TotalEnergies and Agip, and has 18 production licences producing as much as 12 per cent of Nigeria’s crude oil and 21 per cent of its gas.

Rather than offload SPDC’s assets individually, Shell has decided to sell the entire company, leaving it intact so it can continue to operate the joint venture and assume responsibility for the complicated remediation of past environmental damage. 

However, the regulator has expressed several concerns over the proposal, the people familiar with discussions said, adding that the deal may need to be restructured to win approval.

The Renaissance consortium includes Switzerland-based Petrolin and four Nigerian oil producers, ND Western, Aradel Holdings, First E&P and Waltersmith. 

One of the regulator’s concerns has been whether the group has the financial resources to manage the assets, given that Renaissance is relying on Shell to help fund some of its operations. Under the terms of the sale, Shell has agreed to lend Renaissance a total of $2.5bn to cover certain funding requirements, including SPDC’s development of the joint venture’s gas resources.

Another area of concern is whether Renaissance can fund the cost of cleaning up decades of environmental damage across SPDC’s operations and whether those costs have been properly assessed by Shell. Oil spills caused by the rampant tapping of pipelines by organised criminal groups and leaks from ageing infrastructure have left many parts of the Niger Delta heavily contaminated.

Olu Verheijen, special adviser on energy to Nigerian President Bola Tinubu, told reporters last week that the regulator had found issues with the proposed transaction but that she expected the objections to be resolved in “short order”.

“For the independent [oil companies] who are coming in onshore, we want to make sure that they align with our objectives of rapidly growing production,” she said. “They need to ensure that there is a technical and financial capacity and that some of the obligations that need to be addressed are being addressed.”

Some officials of NUPRC and NNPC have argued that the wholesale acquisition of SPDC would give Renaissance too much control and are pushing for the company’s assets to be broken down into smaller entities for other local companies to purchase. 

Renaissance casts such proposals as an attempt by politically connected interests to take a slice of an important company, according to people familiar with the consortium.

Renaissance declined to comment.

This means Warren Buffett's Berkshire Hathaway has now sold ~$100 BILLION of $AAPL stock over the last 2 quarters.

Warren Buffett has now reduced his holdings of $AAPL for 4 straight quarters.

Berkshire Hathaway currently holds $69.9 billion of $AAPL.

Warren Buffett is now building his cash balance at an unprecedented rate, even as the market hits new records.

Berkshire Hathaway just announced that they are FREEZING buybacks and holding $325 BILLION of cash.

Berkshire Hathaway repurchased $0 of stock in Q3 2024.

This compares to $345 million in Q2 2023 and $2 billion in each of the 2 prior quarters.

Berkshire said it will buy back stock when Buffett “believes that the repurchase price is below Berkshire’s intrinsic value."

Meanwhile, Berkshire Hathaway increased their cash pile to a record $325.2 BILLION.

Warren Buffett avoided any large acquisitions and trimmed large portions of his holdings.

As seen in the chart below, Buffett's cash balance has skyrocketed over the last 2 years.

This cash balance is larger than the market cap of all but 27 public companies in the world.

In fact, Buffett's cash pile is now larger than the market cap of Netflix, $NFLX, and Bank of America, $BAC.

This should send warning signs to the market on Monday.

Berkshire’s stock-selling spree extends for eighth quarter, with $166bn dumped over the period

Warren Buffett continued to slash his stake in Apple as part of a selling spree that has seen his Berkshire Hathaway dump $166bn worth of stocks over the past two years, with the Oracle of Omaha finding few other opportunities to chase in the US stock market.

The sprawling industrial and investment conglomerate disclosed on Saturday that it had reduced its position in Apple to $69.9bn in the third quarter, indicating it had shed a further 100mn shares in the three-month period.

In just over a year, Buffett has ditched almost two-thirds of his stake in the technology company, which at its peak in 2023 accounted for $178bn of the company’s stock portfolio.

The stock sales are a dramatic shift by Buffett, given in 2022 he described Apple as one of Berkshire’s “four giants”, accounting for the bulk of the company’s value. At the company’s shareholder meeting in May he described the iPhone maker as “an even better business” than Coca-Cola and American Express, two of Berkshire’s longtime holdings.

“Unless something dramatically happens that really changes capital allocation strategy, we will have Apple as our largest investment,” Buffett told shareholders at the time.

“But I don’t mind at all, under current conditions, building the cash position,” he added. “I think when I look at the alternative of what’s available in the equity markets and I look at the composition of what’s going on in the world, we find it quite attractive.”

Buffett said that he believed there was a high likelihood the US federal government would raise tax rates in the coming years given the country’s sustained budget deficits, which would reduce Berkshire’s profits on future stock sales.

Berkshire reported on Saturday that it had generated gains of $97bn on the $133bn of stock it has sold this year, which after taxes amounted to a $76.5bn pay-off for the group.

“It’s still the greatest trade of all time by the greatest investor of all time,” said Christopher Rossbach, chief investment officer of longtime Berkshire shareholder J Stern & Co.

“The investment in Apple has defined his last decade and the fact that he is selling Apple now for valuation reasons is testament to his sticking to his principles at a scale that no one has before.”

The billionaire investor has been selling more than just Apple. Over the course of the three months to September, Berkshire sold $36.1bn of stocks, including part of its large position in Bank of America. In October, he reduced his stake in Bank of America below 10 per cent after selling more than $10.5bn worth of the US lender’s stock, an investment that dated back to the global financial crisis.

He has found little else to entice him in the US stock market, buying equities worth just $1.5bn. The 94-year-old has been jettisoning stocks at a remarkable clip, with Berkshire being a net seller of equities for eight consecutive quarters.

Even Berkshire shares were off-limits to the noted value investor, who controls the company’s stock buyback programme. Berkshire did not repurchase any of its shares in the third quarter.

Buffett in turn ploughed the proceeds from those sales back into short-term Treasury bills, pushing the company’s cash position to a record $325.2bn.

The sales raise questions over Buffett’s motivations and his investment outlook, with the investor stockpiling an enormous level of cash unseen in the investment world.

He has been content to earn the relatively high yields on short-term US Treasury bills, even as the Federal Reserve has started to cut interest rates. The company earned nearly $10bn in interest on its cash and Treasury position over the past 12 months, including $3.5bn in the third quarter.

He has built up the company’s cash position before, saying the mountain of liquidity gives Berkshire an ability to pounce in a crisis. However, the company has faced far better capitalised competitors in the years since the financial crisis. Heavyweights in the investment world, including Apollo and Blackstone, are often stepping in to finance companies looking to shore up their balance sheets.

It will set up a challenge for Buffett’s heir apparent, Greg Abel. The 62-year-old energy executive has been charged with leading Berkshire when Buffett eventually steps down, including having oversight over its $271.7bn stock portfolio.

The stock sales were disclosed as part of Berkshire’s quarterly earnings, which showed a decline in operating profits. The company’s insurance businesses have been buffeted by two hurricanes that pounded the south-east US.

Berkshire said Hurricane Helene resulted in losses of $565mn in the third quarter, and that it anticipated losses of between $1.3bn and $1.5bn in the fourth quarter from Hurricane Milton, which struck Florida days later.

The insurance business has also agreed to pay $535mn to resolve asbestos-related talcum powder liabilities, pushing its reinsurance unit to a loss for the quarter.

Overall, operating profits fell 6 per cent from a year earlier to $10.1bn. Buffett has long directed investors to its operating results, which do not include the swings in value of its mammoth stock portfolio. He has warned that reported net income is meaningless given the volatility of the stock market. In the quarter, net income swung to $26.3bn from a loss of $12.8bn a year before.

Class A shares of Berkshire have rallied 25 per cent this year, outpacing the total return of the S&P 500.

With money from Jeff Bezos and Bill Gates, scientist Tom Oxley’s startup has a less invasive device that could entice more patients than Elon Musk’s Neuralink.

Shortly after 2 a.m. on a Saturday in a midtown Manhattan sports bar packed with Aussies, Dr. Tom Oxley was feeling stunned. The underdog Brisbane Lions, his longtime favorite Australian rules football club, was up 73 to 27 against the Sydney Swans going into the second half of the championship match.

“It’s a good start,” Oxley acknowledged, clad in his typical game-day fit, a maroon, blue and yellow Lions jersey.

Most days and nights, Oxley, 44, is holed up in Brooklyn’s Navy Yards at the headquarters for Synchron, the brain chip startup he founded with backing from the likes of Jeff Bezos and Bill Gates. But he stole away whenever he could in September to watch the Lions unexpectedly advance in the playoffs. In a later conversation, Oxley would liken his fandom for the Lions—which started when he attended games with his father—to a startup’s “scrappy bootstrap mentality.” He added: “It’s also quite Australian to relish the underdog.”

That’s a useful mentality for Oxley to carry back with him to Brooklyn. Within the burgeoning race to design and commercialize brain chip implants, Elon Musk’s Neuralink has the same status as the Sydney Swans do within Australian rules football: Both are attention-consuming favorites. And yet there’s Oxley and 12-year-old Synchron, which has raised about $145 million.

The company’s device targets patients with amyotrophic lateral sclerosis, also known as Lou Gehrig’s disease, or stroke and spinal cord injuries who experience significant paralysis. It helps them control computer screens with their thoughts. Chief Commercial Officer Kurt Haggstrom estimates that the U.S. market includes up to “millions” of people. Morgan Stanley—which expects such brain devices to become available in 2030—projected last month that companies will generate more than $500 million in collective revenue each year in the U.S. from selling these implants by 2036.

Could Synchron pull off a Brisbane Lions–type upset over Musk? Certainly no other company is better positioned to do so. Synchron is further along in the Food and Drug Administration’s approval process than most other commercial brain chip companies, and it has installed its device in 10 people, the first of whom received it in 2019. (Neuralink implanted chips into its first patient, and then another, earlier this year.)

Importantly, unlike Neuralink, Synchron’s device doesn’t require open brain surgery, which could make it easier to commercialize. Instead, doctors feed it into the brain through a patient’s jugular vein. At all times the chip remains inside the blood vessels. It’s not a quick, prosaic type of outpatient surgery, but it’s not as risky as sawing open someone’s skull. The strategy mirrors a broader change in medicine, and that approach is what most investors point to when asked how the company can compete with Musk.

“The shift in most surgical procedures is towards more and more of these minimally invasive intravascular procedures,” explained Alex Morgan, a Khosla Ventures partner.

When I asked Oxley about the competition between Synchron and Neuralink, Oxley said he is “honored” to be considered a Musk rival. “I’ve revered him for a long time, and I’ve looked up to him,” said Oxley, who drives a Tesla. (His board has jokingly suggested he give up the car—lest Musk listen in.) “He’s shifted the way that we think about things in a positive way in areas that needed shifting.”

Asked why investors give him money instead of Musk, Oxley has a simple response: “Because people like their skulls…that’s probably the best reason. Because I think the ultimate solution is going to be: People want to have their bodies disturbed as little as possible.”

Musk has taken notice of Synchron, too. Two years ago, around the time Synchron implanted its first U.S. patient with its device, Musk called Oxley out of the blue one weekend, and they talked for an hour about how to gain access to different parts of the brain, Oxley recalled. Musk’s approach was to remove a substantial portion of the skull and replace it with an electronic embedded titanium shell, while Oxley contended that there were ways of getting there without touching the skull, he said. (Musk didn’t respond to requests for comment for this story.)

The conversation ended with what appeared to be a funding offer. Musk “basically said to me if I am capital constrained in that endeavor to achieve that goal—especially towards a whole brain interface—that he would like to be helpful,” Oxley said. The investment never materialized.

Underpinning Oxley’s 12-year devotion to building Synchron are his formative experiences as a physician. He points to a harrowing stint early in his medical career on a ward for Lou Gehrig’s disease “They would come there to die,” he recalled. Until recently, Oxley still saw patients at Mount Sinai Hospital, doing about 50 procedures a year to treat patients who had suffered strokes, ruptured aneurysms and other “life-threatening brain explosions,” such as hemorrhages.

The roots of his fascination with the human brain lie in his interest in Friedrich Nietzche, the 19th-century German thinker whose own brain deteriorated from syphilis, and other philosophers. As a young man, Oxley became “obsessed” with figuring out how the human brain can ask itself deep, reflective questions. “What happened in us that was different from other animals? What was it about the making up of the brain that generated consciousness, that made us ask these questions, that then started to lead us down this pathway of self discovery?”

A few days before the big game, Oxley and I met in Synchron’s industrial Brooklyn Navy Yard office. There he showed me the newest iteration of the company’s device, the Stentrode, gingerly withdrawing the tiny gizmo—slightly longer than the spring of a ballpoint pen—from a hefty aluminum briefcase.

Researchers have been testing brain chip implants in humans for roughly two decades, and some have attained impressive results beyond controlling cursors on computer screens. Paralyzed patients have been able to control robotic arms with certain implants in academic experiments. But virtually all these devices have involved cutting through the skull and piercing electrodes into patients’ brains with wires dangling out of their heads.

To avoid all that, Synchron’s approach is to feed a needle and tube through the jugular vein all the way to the top of the brain. The Stentrode is then pushed through the tube into the brain, where it expands and mounts onto the wall of the superior sagittal sinus, a blood vessel close to the brain’s motor cortex—the movement command center. Any brain signals the Stentrode detects are sent down through an electrical wire that runs back through the vein and plugs into an iPod Shuffle–size receiver sewn into a person’s chest. Batteries last 10 years, similar to those in a cardiac pacemaker.

That receiver transmits commands via Bluetooth to a patient’s computer or iPad, allowing them to access text messages and control other applications. Once the Stentrode is installed, patients go through calibration exercises, with Synchron staff instructing them to think about moving different parts of their body.

Synchron’s Stentrode isn’t the only such device people with paralysis can use. Eye trackers have been hot spots for innovation in recent years. Apple, for example, revamped its eye-tracking features in its latest iOS update. Still, eye trackers can be tiring for some patients, and selecting things on the screen can be finicky given that it requires people to stare at one spot for a certain amount of time. Plus, the most severe states of paralysis, like locked-in syndrome, limit even eye movements.

Hiding electrodes inside blood vessels as opposed to lodging them in the brain has limitations. The sensors don’t detect electrical signals with the level of strength or detail Neuralink does, which Oxley acknowledges. But that doesn’t phase the Synchron investors I spoke with. “The fact that you get any signal at all is kind of amazing,” said Bob Nelsen, managing director of prolific biotech investing firm Arch Venture Partners, which led Synchron’s Series C two years ago. He suggested that advances in other parts of technology could help the company better analyze and understand the signal the sensor does get.

Synchron is currently developing a new version of its Stentrode, which, by Oxley’s estimate, can detect brain activity “about 10 times better” than the version implanted in the first 10 patients. He doesn’t know what that will mean in terms of functionality but suggests it could mean adding more-nuanced controls for computer screens.

In the long run, Synchron’s hope is to weave multiple, sensor-laden wires into different blood vessels around the brain to detect a much wider array of brain activity.

“The brain does different things in different regions,” said Oxley. “And if you ram a million electrodes into a tiny region, that whole bunch of neurons—they’re all doing the same thing.”

After about an hour of Oxley’s show-and-tell with the Stentrode—and a professorial lesson on brain anatomy—it seemed like an apt time to ask him why he committed himself to all this.

“I’m not religious—I don’t know why we’re here—but it seems to me the best way that you could spend your life is answering some of the mysteries and changing the way that we understand things in a way that helps us as a species move forward,” he said, leaning back in his chair after a long pause. “I chose the brain because it was the biggest mystery I could think of.”

Oxley frequently launched into these philosophical tangents, at one point sharing with me reflections from Carl Jung’s “The Red Book,” which was engrossing him in late September. Asked where all his ruminations come from, Oxley pointed to his father, a former diplomat who shaped his upbringing with strong opinions and “intellectual aggression.”

Oxley spent part of his childhood in Switzerland, where his dad represented Australia at the U.N.—at one point chairing a precursor organization to the World Trade Organization—before the family moved back Down Under. At the dinner table, his father would regularly grill him and his sisters on politics, culture and international affairs. The impromptu exams instilled a mentality of “Don’t open your mouth unless you absolutely know what you’re talking about,” Oxley recalled.

Eager for some distance from his diplomat father’s interests, Oxley decided to pursue medicine. “I figured if I move into a domain that was totally away from his expertise, he wouldn’t pound me to the ground with intellectual dogmatism.”

Oxley attended medical school in Australia, graduating in 2005, and pursued residencies in both internal medicine and psychiatry. He was particularly interested in the latter after watching two friends experience psychotic episodes, one from a psychedelic drug, the other from schizophrenia. But Oxley was shaken when a patient committed suicide. He grew frustrated with not being able to understand the biological mechanisms behind psychiatric conditions. Around the same time, he began reading about brain computer interfaces.

Oxley took a year off from training in 2010 and traveled through 35 countries, ending his tour in the U.S. There, he met Colonel Geoffry Ling, a neurologist who founded a biotech arm of the Defense Advanced Research Projects Agency. Oxley impressed Ling and his team with an idea of using blood vessels to reach the brain. Weeks later, he had secured $1 million from DARPA to begin research back home in Australia.

To build some of the earliest prototypes of Synchron’s devices, he recalls going through the hospital trash to find disposed devices that had been used to remove brain clots. In one instance, a nurse reported him after seeing him pulling devices from the garbage, but he had approval from one of the doctors, so he kept doing it. After sterilizing them, Oxley would tinker with them and hook up sensors to them manually.

Oxley finished his doctorate in neuroscience in 2015 and then moved to New York for an interventional neurology fellowship at Mount Sinai. He continued doing lab research in Australia remotely. The fellowship had him working 100 hours a week, but he would use the time difference with Australia to his advantage, managing the lab at night in New York. In 2019, Synchron implanted its chip in the first of four Australia-based patients, each of whom was able to use the device over the course of a year without any serious side effects.

Oxley cites 2020 as the most painful period for building the company. Synchron had nearly $20 million in funding to that point, mostly from government grants, but was running out of cash. Meanwhile, Oxley was hitting a wall with investors. He grew frustrated when they turned him down, citing concerns about market size and whether Medicare might pay for the device.

“What happens is, you go and meet really smart people, and then they say no, and they say no in a million different ways,” he said.

Khosla Ventures eventually found Synchron while searching for patents related to brain chips that didn’t require removing part of the skull, and the firm led a $40 million funding round in 2021. Morgan, who led the deal, said Oxley has always been laser focused on patient outcomes. And his philosophy interests, in Morgan’s view, are emblematic of many successful entrepreneurs and executives.

“Pick the Charlie Mungers the world or the Jeff Bezoses—they actually wrote a lot about a general philosophy of the world and life,” Morgan said, attributing some of those individuals’ financial success to an “insatiable curiosity.” In 2022, Synchron implanted its chip in the first of six patients in the U.S. and raised another $75 million from Arch Ventures. Earlier this year, the company finished the first of two major FDA clinical trials, showing that the device was safe.

Still, the road to getting the chips approved and making any meaningful revenue remains long. Before Synchron starts the second trial, which will have to demonstrate that the device sufficiently helps patients, the company is planning another small trial for the newer version of the Stentrode.

Haggstrom, the chief commercial officer, anticipates it will take three to five years to begin selling the devices widely, in line with Morgan Stanley’s estimates. He acknowledged total customers in the first year after an FDA approval will probably be “more in the hundreds.” At an estimated price point of $60,000 to $100,000 per device, getting insurers on board will be another big hill to climb.

Oxley, 12 years into his journey, seems as energized as ever. “I’ll flip into complete, absolute nihilism if I don’t feel like I’m doing something that’s really worthwhile, and I couldn’t think of anything more worthwhile or more important than doing this.”

Deep down, he also hopes the Stentrode may one day be able to counter memory loss, an issue that has become more personal to him since his dad was diagnosed with Alzheimer’s disease five years ago. He acknowledged that such a capability is still a long way away.

“It kind of is a bit frustrating that I’ve been so close to neurology—and I’m working in it day in, day out—and nothing I’ve done is going to help at all with him,” he said.

Back at the sports bar around 3:30 a.m., the crowd had begun to clear out as the Lions crystallized their blowout victory. They won 120 to 60, and several Swans fans came up to Oxley to offer their congratulations.

As Oxley looked up at the TV for another 15 minutes watching his team collect the trophy, he picked up the phone and dialed his folks back home in Melbourne, eager to share the moment with them. “I’m watching at a pub in New York,” he told them. His father came to the phone. “Hey, Dad, what do you think?” Oxley asked. “Are you watching?” Indeed he had been.

U.S. energy regulators on Friday rejected a proposal related to Amazon Web Services’ deal to buy nuclear power for several data centers for artificial intelligence in Pennsylvania, according to a public filing.

In a split vote, the Federal Energy Regulatory Commission denied a request to increase the amount of power that would supply the data centers, putting the project in limbo. The agency said it had concerns that offloading a large amount of power from the energy grid, which AWS’ plan entails, could negatively affect customers and the grid’s reliability.

AWS planned to buy up to 1 gigawatt of power from Talen Energy, which owns a nuclear power plant located in Luzerne County, Pa., to power several data centers at the site. The deal, announced in March, was seen as a pathway for AWS to meet its growing need for AI data center power with clean energy, but it has been at the center of a larger debate around whether power serving the grid should be purchased by technology giants.

Willie Phillips, the chairman of FERC, who voted in favor of the plan, said Friday in a press release that “maintaining our nation’s leadership in this ‘era-defining’ technology will require a massive and unprecedented investment in the data centers necessary to develop and operate those AI models. And make no mistake: access to reliable electricity is the lifeblood of those data centers.”

It isn’t clear how AWS will proceed with its planned data center campus in Pennsylvania. It has invested in other nuclear projects in recent weeks. Spokespeople for FERC for AWS did not immediately respond to a request for comment.