Closing Stock Market SummaryToday's trade had a predominately negative bias, sending many stocks lower. The main indices tried to move higher in the early going, but quickly fell below their flat lines and remained in the red through the close. Investors were digesting a slate of economic data and corporate news ahead of the open, including some pleasing Q1 earnings results from several large banks.
JPMorgan Chase (JPM 138.73, +9.74, +7.8%), Citigroup (C 49.56, +2.26, +4.8%), BlackRock (BLK 691.33, +20.60, +3.1%), and PNC Financials (PNC 121.85, +0.44, +0.4%) were among the top performing stocks today, driving a 1.1% gain in the S&P 500 financial sector.
While the financial sector was providing support for the broader market, mega cap losses offset much of that support and drove a lot of the index level weakness. Names like Meta Platforms (META 221.49, +1.14, +0.5%), Amazon.com (AMZN 102.51, +0.11, +0.1%), and Alphabet (GOOG 109.46, +1.27, +1.2%) were able to recover their losses and finish with at least a modest gain. This coincided with the broader market rebounding from its lows of the day. Ultimately, the main indices closed the session off their lows of the day.
In addition to pressure from mega cap stocks, investors were reacting to Fed Governor Waller's (FOMC voter) remarks in a speech before the open that the Fed hasn't made much progress on its inflation goal and that he thinks monetary policy needs to be tightened further and remain tight for a substantial period of time. Also, some added selling pressure kicked in after the preliminary University of Michigan Consumer Sentiment Index for April at 10:00 a.m. ET showed year-ahead inflation expectations rising to 4.6% from 3.6%.
Treasury yields rose today in response to the inflation expectations data and Fed Governor Waller's comments. The 2-yr note yield rose 11 basis points to 4.10% and the 10-yr note yield rose seven basis points to 3.52%.
The Dow Jones Industrial Average (-0.4%) was a relative underperformer among the major indices today, feeling the pinch of sizable losses in Boeing (BA 201.71, -11.88, -5.6%) and UnitedHealth (UNH 551.79, -14.44, -2.7%). BA declined on reports it expects production and delivery delays for its 737 MAX due to parts problems while weakness in UNH stemmed from investors' concerns about meeting short and long-term EPS targets in the face of Medicare Advantage changes.
Notably, regional banks were under pressure today despite gains in larger banks. The SPDR Regional Bank ETF (KRE) fell 2.0%. The weakness in regional bank stocks contributed to the underperformance of the Russell 2000 (-0.9%).
- Nasdaq Composite: +15.8% YTD
- S&P 500: +7.8% YTD
- S&P Midcap 400: +2.4% YTD
- Dow Jones Industrial Average: +2.2% YTD
- Russell 2000: +1.1% YTD
Reviewing today's economic data:
- Total retail sales declined 1.0% month-over-month in March ( consensus -0.4%) following an upwardly revised 0.2% decline (from -0.4%) in February. Excluding autos, retail sales were down 0.8% month-over-month ( consensus -0.4%) following an upwardly revised unchanged reading (from -0.1%) in February.
- The key takeaway from the report is that sales declines were seen across most retail categories, reflecting weakness in consumer spending on goods that should exacerbate concerns about an economic slowdown that cuts into earnings prospects.
- Import prices declined 0.6% month-over-month and were down 4.6% year-over-year. Excluding fuel, import prices were down 0.5% month-over-month and down 1.5% year-over-year. Export prices fell 0.3% month-over-month and were down 4.8% year-over-year. Excluding agricultural products, export prices were down 0.2% month-over-month and were down 5.2% year-over-year.
- Total industrial production increased 0.4% month-over-month in March (consensus +0.2%) following an upwardly revised 0.2% increase (from 0.0%) in February. The capacity utilization rate jumped to 79.8%( consensus 79.0%) following an upwardly revised 79.6% (from 79.1%) in February.'
- The key takeaway from the report is that the entire gain in industrial production in March was driven by the increased output of utilities, which is to say the headline print belies an otherwise soft environment for manufacturing output.
- Business Inventories rose 0.2% in February ( consensus +0.3%) following a revised 0.1% decrease in January (from -0.1%).
- The preliminary University of Michigan Consumer Sentiment Index for April checked in at 63.5 ( consensus 62.7) versus the final reading of 62.0 for March. In the same period a year ago, the index stood at 65.2.
- The key takeaway from the report is that short-run inflation expectations were up noticeably from the prior month, which is something that could compel the Fed to press ahead with another rate hike in May even though long-run inflation expectations remained stable.
Looking ahead to Monday, market participants will receive the following economic data:
- 8:30 a.m. ET: April Empire State Manufacturing survey (prior -24.6)
- 10:00 a.m. ET: April NAHB Housing Market Index (prior 44)
- 4:00 p.m. ET: February Net Long-Term TIC Flows (prior $31.90 bln)
G7 rebukes Switzerland over Russian sanctions loopholes
Ambassadors claim billions of francs in oligarchs’ offshore assets being hidden but Bern says charge is ‘baseless’
The G7 has privately rebuked Switzerland for not doing enough to combat Russian oligarchs evading sanctions.
A letter sent to the Swiss government, signed by G7 ambassadors in Bern on behalf of the group, as well as the EU’s ambassador, said Swiss privacy laws and other “loopholes” were being exploited by Russians to hide billions of francs in offshore assets.
Switzerland, which is officially neutral, has publicly moved in lockstep with the EU in enacting economic sanctions against Russia following Moscow’s full-scale invasion of Ukraine last year.
According to the Swiss state secretariat for economic affairs (Seco), $7.5bn of Russian assets have been frozen.
But G7 ambassadors cast doubt on that figure. “Independent sources estimate the total held in Switzerland could be significantly higher,” they wrote.
The letter, dated April 5 and addressed to the governing Federal Council, thanked Switzerland for its “laudable and significant” efforts to stop the country becoming a “safe haven” for Russian money. But it added that more work was urgently needed to ensure compliance with the sanctions regime.
“Concern has emerged about the possibility that Swiss privacy provisions . . . could be used to cover the tracks of financial shelters [sic] . . . We also have concerns that law enforcement officials are blocked from investigating illicit financial structures . . . because of privacy protections,” it said.
“[Swiss officials] were unable to freeze assets under protections for dual nationals, legal residents, those with legal ties to Swiss entities, or those holding indirect beneficial ownership. We share a concern that these loopholes to legal action put Switzerland at reputational risk.”
A copy of the letter was obtained by the Financial Times and verified as genuine by senior diplomats from two G7 powers. The contents of the letter were first reported by Switzerland’s Handelszeitung newspaper.
A spokesperson for Seco said the G7 ambassadors’ claims were “baseless” and stressed that the Swiss government had been “swift to align itself” with western sanctions on Russian money.
“Ensuring their full and effective implementation is a priority for the Federal Council,” they said. The spokesperson added that the G7 ambassadors appeared to have misunderstood relevant areas of Swiss law. They said dual nationals and residents were subject to sanctions and Swiss lawyers were criminally liable for facilitating sanctions evasion.
In an interview with the NZZ newspaper this week, Seco’s new director Helene Budliger Artieda pointed out that Switzerland’s tally of frozen Russian assets was a third of the size of those frozen across the whole of the EU. France has frozen just SFr1.2bn ($1.3bn) and Germany SFr2.2bn, she noted, decrying the finger-pointing from neighbours.
Authorities in Bern had not been given any tangible information from partner countries about Russian assets held in Switzerland that had slipped through the net, she said.
Bern has nevertheless tried to resist the implementation of stricter financial measures against Moscow, in particular the permanent confiscation of Russian assets.
Any appropriative measures beyond temporary asset freezes, the Swiss government said in February, would be unconstitutional and unenforceable in Switzerland.
Many of the country’s biggest banks have also begun to fret over potential negative consequences for Switzerland as a result of it matching western sanctions. In particular, they worry about the message being sent to rich Chinese clients who they count among their most lucrative customers.
The country’s biggest political party, the rightwing populist SVP, has also opposed measures that it said would damage Switzerland’s neutral standing.
US ambassador Scott Miller warned last month that Bern’s conflicted stance over Ukraine was evolving into its greatest political challenge since the second world war.
“Switzerland cannot call itself neutral and allow one or both sides to exploit its laws for their own benefit,” he said.
Loro Piana Interiors Teams With Argentinian Designer Cristián Mohaded
Called “Apacheta,” the collection will be installed at Loro Piana's Cortile della Seta, transforming the headquarters into a dreamlike landscape inspired by the Andean tradition.
MILAN — Loro Piana Interiors is introducing a new project in a collaboration with Argentinian designer and artist Cristián Mohaded.
Called “Apacheta,” it will be installed at Loro Piana’s sprawling Milan headquarters in the Cortile della Seta and be unveiled during Design Week. The expansive location will be transformed into a dreamlike landscape inspired by the Andean tradition.
“Apachetas are piles of irregular stones that mark paths in the Andes, built by travelers over centuries and growing to become massive towers,” explained Mohaded. “They were left as a tribute and a thanksgiving to the spirit of the Pachamama, Mother Earth, and considered sacred.”
They were the starting point for Mohaded to create a series of unique pieces of furniture with Loro Piana Interiors.
“We pay tribute to nature, sharing with Loro Piana values such as a passion for nature and its gifts, materials, fabrics and craftsmanship, and the certainty that beauty and harmony can arise from contrasts,” continued Mohaded.
There is a deep connection between Loro Piana, which is helmed by chief executive officer Damien Bertrand and controlled by LVMH Moët Hennessy Louis Vuitton, and Argentina, and in particular the province of Catamarca, where Mohaded was born and where Loro Piana sources the rare vicuña, and whose contrasting landscape with its majestic rocks, rivers, and white and red lagoons is a source of inspiration.
The installation in the Loro Piana building will present 12 towers of up to 8 meters rising from the ground. Irregular, angular, and apparently unstable, the stones will be covered with Loro Piana Interiors fabrics from old collections, here gaining a second life, in sync with the brand’s focus on sustainability and the possibility of reusing discarded materials.
Nestled among the towers will be the pieces of furniture designed by Mohaded: sofas, stools, a bench and courtesy tables. The stones, he said, are softened by using Loro Piana’s precious fabrics — including vicuña.
They feature hand-carved and chiseled oak elements in the more rounded parts, to create contrast. Wood and Incas alpaca and wool are juxtaposed with ceramic, whose colors are inspired by the Argentinian lagoons, red or white, the same colors as the towers. The colors of the lagoons are caused by sediment, micro-organisms, and the pigmentation of some algae. Ceramic is transformed into the surface of the tables, to create small lagoons between the furniture.
Mohaded said the project reflects the connection between Loro Piana and Latin America, where the company has been actively contributing to saving the vicuña species since the ‘80s. In 1994 it headed the International Vicuña Consortium, signing an agreement with the Andean communities to buy, process and export vicuña fibers created from animals that were gently and humanely sheared.
“We approached Cristián knowing his passion for craftsmanship, his research in materials, his extreme love for them, for their textures and contrasts,” said Francesco Pergamo, director of Loro Piana Interiors division. “Everything he creates starts from this and we thought it was the right artist to entrust with our own materials. When we saw the project, we had the immediate certainty that it was beyond expectations. Cristián has not only put all his magic into the materials, but has infused the design with all the values we share.”
The Apacheta pieces are available by order only. Mohaded is already working on a second chapter of Apacheta, but was mum about the details.
Mohaded has also designed the Arca Bag — his first foray into fashion, which will be presented in Loro Piana’s pop-up store in Via Montenapoleone during Design Week.
The name, Arca Bag, refers to the Latin meaning of the term, which identifies a piece of furniture used in ancient times to store clothes and precious household objects. “The idea is that the bag is designed to hold and protect one’s personal belongings, where craftsmanship and technology come together,” he said.
The base of the bag is realized in hand-woven wicker, while the upper part is crafted in velvet calf leather, thermo-molded in 3D for a closure that remains almost suspended, yet very secure. The Arca Bag is proposed in three sizes — small, medium and large — and in three different colors — wheat yellow, currant red and black — available to order.
The Loro Piana Interiors division was launched in 2006, initially only aimed at professionals in the sector and now also open to end consumers. It is also present in the yachting and aviation industries and in the hospitality area.
Pergamo was previously director of women’s and leather goods product development and was named director of the interiors division in 2019.
His and the division’s first main project was the renovation of Villa Cima, in the heart of the Villa d’Este park, in 2019, with interiors entirely by Loro Piana.
The “Apacheta” installation will be available Tuesday and Wednesday for a private preview, while it will be open to the public from April 20 to 23.
There will also be an outdoor installation in Piazzetta Brera to complete the project.
Bird Flu Keeps Raging. Some Say Vaccines Are Needed to Stop It.
Poultry-industry groups fear inoculating against the virus would hurt exports
To stop the devastating global bird-flu outbreak that has killed over 100 million poultry, the U.S. and Europe are embracing a tactic many countries have long resisted: vaccines.
The U.S. and parts of Europe don’t routinely inoculate poultry against bird flu, which emerges every few years and spreads and kills easily, but typically recedes after domestic birds are culled.
Groups representing U.S. poultry companies have historically opposed vaccinating birds over concerns that inoculation could imperil trade. There are also questions about the logistics and cost of administering shots that must be injected into each chick or egg.
But the unprecedented destruction of this outbreak, which has felled 58 million farmed birds in the U.S. and is running into its third year in Europe, has driven governments and businesses to search for options. Animal-health and pharmaceutical companies including Zoetis Inc., ZTS -0.12% Ceva Animal Health, Boehringer Ingelheim and Merck MRK -0.39% & Co. have developed vaccines that are in testing.
The U.S. Department of Agriculture’s research service expects results from tests of four vaccines in chickens in late May or early June, said Erica Spackman, a bird-flu expert at the agency. Two test vaccines were made by USDA labs and two were developed for past flu outbreaks by Merck and Zoetis. Tests in turkeys and ducks will follow. If effective, any vaccine would need additional approval within the agency before wider use.
France, the world’s top producer of foie gras, this month said it intends to buy 80 million vaccine doses and invited companies to bid for government contracts. Some 21 million birds in the country were culled there as of last summer, and over 200 more outbreaks occurred by the end of the year.
The current dominant strain globally is a version of the H5N1 virus that triggered destruction in Europe in 2021. It was detected in U.S. wild birds in January 2022, and a few weeks later was found in commercial turkey flocks. More than 58 million commercial or backyard birds have died, with detections of the virus in wild birds in 49 states, according to the USDA. In the past few months, South American countries have reported contagious, deadly bird flu for the first time. It has also sickened and killed mammal species including skunks, raccoons, bobcats, bears, seals and mountain lions.
The seasonal virus has shifted to linger for years in wild birds, which pass it to commercial birds. “It’s a biological change in the virus,” said David Swayne, a former director of a USDA laboratory that studied the disease. “I don’t think we know genetically what’s changed, but it’s changed such that it’s spread through the wild bird population.”
The persistent circulation in wild birds is “absolutely novel” for the Americas, said Richard Webby, an influenza virologist at the Department of Infectious Diseases at St. Jude’s Children’s Research Hospital in Memphis, Tenn. Water birds are likely hosts of the virus, and with the spring migration to the Northern Hemisphere under way, scientists are watching for a surge in cases.
Some countries have endemic versions of the bird-flu virus and regularly vaccinate poultry. But many of those countries don’t have a big trade presence, according to Leslie Sims, an avian-flu expert and consultant based in Melbourne, Australia, who has advised governments on animal-disease prevention and control.
“Traditionally, countries have not traded with countries that vaccinate,” said John Clifford, a former chief veterinary officer at the USDA and a consultant on trade for the USA Poultry and Egg Export Council. Objections range from concerns that some vaccinated birds will still get sick to the high cost of surveillance required of flocks after a vaccination round, Dr. Clifford said.
The National Chicken Council, which represents companies that produce about 95% of U.S. chickens bred for meat, opposes vaccination because it would threaten $5 billion in annual chicken exports, said spokesman Tom Super.
France has backed tests of two vaccines in ducks, including an RNA vaccine made by French company Ceva tailored to the current strain of the virus. Another set of French tests involve a vaccine developed by German pharmaceutical and animal-health company Boehringer Ingelheim that contains a synthetic bird-flu virus surface protein, hemagglutinin, that is injected into the birds, said Jean-Luc Guérin, chair of avian biosecurity at the National Veterinary School in Toulouse.
Dr. Guérin said results of these tests will be released within a few weeks
The Dutch government has funded research testing vaccines in chickens and is backing field tests and pilots at farms, according to the agricultural ministry. Six million birds were culled in the country because of the outbreak.
In preliminary results reported in March, one research group said that two of four vaccines tested protected chickens against infection by the current variant and prevented the transmission of the disease, according to Sjaak de Wit, professor of veterinary medicine specializing in poultry viruses at Utrecht University in the Netherlands and a member of the team that conducted the tests.
The two effective vaccines, one made by Ceva and the other by Boehringer Ingelheim, both involve a harmless turkey virus that is engineered to include genetic instructions to make hemagglutinin, the bird-flu protein. The engineered virus is injected into the bird, where it multiplies and simultaneously manufactures the protein.
John El-Attrache, global director at the science and investigation department at Ceva, said South American countries including Paraguay, Ecuador and Uruguay are close to licensing Ceva’s turkey-virus vaccine for bird flu.
It isn’t clear how to stop the virus among wild birds, who continue to harbor and spread infections, said Daniel Perez, a virologist at the College of Veterinary Medicine at the University of Georgia.
“We have to think beyond the chickens in the chicken house,” Dr. Perez said.
Ukrainians said to pull back in Bakhmut as Moscow launches new push
- Britain says Russian mercenaries, troops improve cooperation
- Ukrainian officials say Russia diverting forces to Bakhmut
- Capturing city would be Moscow's first big gain in eight months
- Ukraine preparing for counteroffensive
NEAR BAKHMUT, Ukraine April 14 (Reuters) - Ukrainian troops have been forced to withdraw from some parts of Bakhmut in the face of a renewed Russian assault on the ruined battlefield city, Britain said on Friday, with Moscow pressing to achieve a victory before Ukraine's expected counteroffensive.
Ukrainian officials say Russia has been drawing down troops from other areas on the front for a major push on Bakhmut, which Moscow has been trying to capture for nine months to reenergize the all-out invasion it launched more than a year ago.
Western countries have in the past pointed to acrimony between the Russian defence ministry (MoD) and the country's main mercenary force Wagner as a major Russian weakness.
"Russia has re-energised its assault on the Donetsk Oblast town of Bakhmut as forces of the Russian MoD and Wagner Group have improved co-operation," Britain's military said in a daily briefing note.
"Ukrainian forces face significant resupply issues but have made orderly withdrawals from the positions they have been forced to concede," it said.
Near Bakhmut, soldiers from a Ukrainian artillery unit were loading shells into a Soviet-era howitzer and firing towards the front line, where they said Russia had massed its foot soldiers.
"Our target in that direction is mostly infantry. There is a big concentration of the Russian Federation's 'human factor'," said Dmytro, the artillery unit's 44-year-old commander. The gun thundered as the unit blasted three shells, the first to find range, the second to adjust aim.
"The third one is finishing off. Most likely, I hope, the infantry they spotted was eliminated."
MAIN TARGET
Bakhmut, which held around 70,000 people before the war, has been Russia's main target in a massive winter offensive that has so far yielded scant gains despite infantry ground combat of an intensity unseen in Europe since World War Two.
Ukrainian Deputy Defence Minister Hanna Maliar said Russian commanders had redirected troops to Bakhmut from other areas.
"The enemy is using its most professional units there and resorting to a significant amount of artillery and aviation," she wrote on the Telegram messaging app.
Every day, the enemy carries out in Bakhmut from 40 to 50 storming operations and 500 shelling episodes."
The British update said the Ukrainians still held western districts of the town but had been subjected to particularly intense Russian artillery fire over the previous 48 hours.
Wagner mercenary units were now focusing on advancing in the centre of Bakhmut, while Russian paratroopers were relieving them in attacks on the city's flanks, it said.
The Institute for the Study of War think tank said geolocated footage indicated that Russian forces had advanced further west into central Bakhmut the previous day and made "marginal advances" in the south and southwest of the city.
Capturing the city would be Russia's first substantial victory in eight months. Moscow says it would open a route to capturing more territory in Ukraine's eastern Donbas region, a major war aim.
After major Ukrainian breakthroughs in the second half of 2022, the front lines have barely budged over the last five months, despite a massive Russian offensive.
'READYING OUR BOYS'
Moscow has made use of hundreds of thousands of freshly conscripted reservists and thousands of convicts recruited as mercenaries from jails. Kyiv, meanwhile, has mostly stuck to defending its lines while waiting for the arrival of new Western arms for an expected counter-offensive in coming months.
"We are readying our boys," President Volodymyr Zelenskiy said in a video address late on Thursday. "We look forward to the delivery of weapons promised by our partners. We are bringing victory closer as much as possible."
Ukraine had appeared likely to abandon Bakhmut at the end of February, but announced in March it would fight on there, saying it was worth defending the largely ruined city because of the losses it was inflicting on Russians trying to assault it.
Both sides say they are inflicting huge casualties. U.S. intelligence documents leaked last week said Russia had lost 35,500-43,000 soldiers killed, while Ukraine had lost 15,500-17,500, between a third and half as many.
Thousands, perhaps tens of thousands, of Ukrainian civilians have also been killed across the country since Russia launched its invasion in February last year. Moscow claims the war is necessary to protect Russia from a security threat. Kyiv and the West call it an unprovoked war to conquer an independent country.
Bloomberg GPT-Style AI Tool To Be Integrated Into Terminal
Institutional traders, portfolio managers, and analysts using Bloomberg LP's Terminal software can anticipate an exciting upgrade, as CNBC reports that the same underlying technology as OpenAI's GPT will be integrated into the financial platform.
About two weeks ago, Bloomberg released a research paper detailing the development of Bloomberg GPT. This internal AI model can answer financial questions in the search function like "CEO of Silicon Valley Bank," asses the bullish or bearish sentiment of headlines, and even write headlines based on text.
The tech behind Bloomberg GPT wasn't developed using supercomputers, nor is it using OpenAI's technology. Instead, Bloomberg used "freely available, off-the-shelf AI methods and apply them to its massive store of proprietary — if niche — data," CNBC said.
About half the data used to create Bloomberg's model is derived from non-financial sources gathered from the web, such as GitHub, YouTube subtitles, and Wikipedia. This data is combined with 100 billion words from a proprietary dataset called FinPile, which encompasses financial information the company has collected over the past two decades. The FinPile dataset comprises securities filings, press releases, Bloomberg News articles, stories from other outlets, and a web crawl specifically targeting financial web pages.
Bloomberg's future upgrade to the Terminal is a great start considering the platform starts at around $30,000 per year. There was no word if additional fees would be applied to customers once the technology integration is complete.
"Both the capabilities of GPT-3 and the way that it achieved its performance through language modeling wasn't something that I expected."So when that came out, we were like, 'OK, this is going to change the way that we do NLP [natural language processing] here,'" Gideon Mann, head of ML Product and Research at Bloomberg, told CNBC.
Here are some example of how a Terminal can use Bloomberg GPT:
Asking about CEOs...
Write a headline...
Furthermore, Bloomberg GPT will allow users to efficiently search through vast amounts of financial data, thereby saving time.
"There's a lot of work we're doing to help clients address that data deluge of news stories, whether that's through summarization, or monitoring, or being able to ask questions on those news stories or transcripts. There are a lot of applications there," Mann said.
CNBC noted Bloomberg is planning to integrate its GPT into Terminal features and services in the near term, although there was no word if a ChatGPT-style chatbot would be released on the platform.
The Greatest Marathoner Faces a New Challenge: The Boston Marathon’s Hills
After breaking his own world record, Eliud Kipchoge takes aim at winning all six World Marathon Majors
When you’ve pushed the boundaries of human achievement as far as Eliud Kipchoge, there comes a time when you have to start inventing milestones. The Kenyan marathoner is already the sport’s world record holder. He’s also the only human ever to run 26.2 miles in less than two hours, a feat achieved in a non-race environment.
Yet there are also milestones that Kipchoge hasn’t reached. No one has won all six of the world’s major marathons. No one has won three gold medals in a row at the Olympics in the marathon.
In the next 16 months, both of those unthinkable feats are within Kipchoge’s grasp. And that explains why, on Monday, the 38-year-old will toe the line at the Boston Marathon for the first time in his decorated career.
Boston gives Kipchoge a shot at adding to his list of major marathon wins. And by competing on Boston’s brutal hills—and possibly in New York City later this year—he can test his readiness for the 2024 Paris Olympics, whose marathon course features the most elevation ever.
“He wants to write history, of course,” said Jos Hermens, founder of the NN Running Team with which Kipchoge trains. “If he can do it with course records that would be even more amazing.”
Kipchoge already has 10 major marathon wins to his name: four in Berlin, four in London, plus Chicago in 2014 and Tokyo in 2022. He holds the course records everywhere, save the Windy City. He’s twice broken the world record in Berlin, most recently in September 2022 when he crossed the finish line in 2:01:09. His average pace was a mind-blowing 4 minutes and 37 seconds per mile.
“I tell people that if you want to push your limits, come to Berlin,” Kipchoge said after the 2022 race. “I have shown the way to many athletes, to the next generation, that one day a human being will run under two hours in a normal course.”
Kipchoge has accomplished all of these time-bending feats amid a torrent of falling records in long-distance running that coincided with the arrival of Nike’s so-called “super shoes.” The controversial footwear features a thick, cushy midsole and a built-in carbon-fiber plate designed to improve runners’ economy of movement.
Another facet of his blazing times has been the races he has chosen. Berlin is favorable to fast times because the course is pancake flat, with a total elevation gain of 241 feet. The late September calendar slot usually ensures favorable weather conditions.
But running a marathon in the crisp German autumn is nothing like braving Boston in April. The race in Beantown isn’t for the faint of heart—or quadriceps.
The marathon has a downhill pitch from the start in Hopkinton, Mass., through mile 16. Then come the Newton Hills, four steep climbs culminating in “Heartbreak Hill,” the incline named for its tendency to derail runners’ races. The final climb entails roughly 90 feet of elevation over about half a mile—which feels like a lot more than it is after 20 miles of pounding.
As tough as the uphills are, nothing shreds a marathoner’s legs like running downhill. It’s why Boston, with its 815 feet of elevation gain and 1,275 feet of loss, is widely considered to be the hardest of the six major marathons.
There is another, more unpredictable, factor: the mercurial Northeast weather. Des Linden famously endured temperatures in the 30s, sheets of freezing rain and 25-mile-per-hour gusts of wind en route to winning in 2018. As of Friday, the forecast for Monday looks milder: temperatures ranging from the high 40s to mid 50s with a 60% chance of rain in the afternoon.
The last time Kipchoge raced in less-than-ideal weather was at the pandemic-modified London Marathon in October 2020. Temperatures that day hovered around 48 degrees as elite athletes completed nearly 20 laps of a circuit course in steady rain. He placed eighth, his worst finish ever, and said after the race that he was thrown off when one of his ears became waterlogged.
An unwillingness to gamble on adverse Northeastern precipitation wasn’t the thing keeping Kipchoge from coming to Boston, however. Hermens said that the NN Running Team favors a more conservative approach to racing with its athletes. Rarely does Hermens ask athletes to race more than two marathons in a calendar year—with less than a week between Boston and London, elite runners must choose between the races. Rarely does he push athletes toward hilly courses either.
“If you’re a little bit stiffer, all the pounding you get can work against you,” Hermens said. “Dangerous is too big of a word,” he added, but the risks outweighed the rewards for Kipchoge while he was chasing gold medals and world records.
There was also a financial factor. Mary Kate Shea, the longtime overseer of recruitment of professional athletes for the Boston Marathon, “always came with offers and was always trying to schmooze him up” to get Kipchoge to run Boston, Hermens said. The NN Running Team founder wouldn’t say what Kipchoge’s appearance fee is for this year’s Boston Marathon, but noted that the Boston Athletic Association tends to operate on a tighter budget than London race organizers.
“It was a very fair offer [from the B.A.A.], but London is always a little bit more,” Hermens said. “It is well known that London is the best payday for athletes.”
The coffers of the B.A.A. may soon increase: in 2024, Bank of America will take over from John Hancock as the presenting partner of the race. According to a person familiar with the deal, Bank of America is making a larger financial commitment than its predecessor.
A spokesperson from the B.A.A. declined to comment on the financial details of their partnerships.
Perhaps the biggest thing pulling Kipchoge toward Boston in 2023 is one of the things that kept him away before: the notorious Newton Hills. If he wants to become the first three-time marathon medalist in history, Kipchoge will need to conquer an Olympic marathon course that is très vallonnés. True to French form, the course in Paris pays homage to a protest march undertaken by women peasants in 1789 and stretches from the Hotel de Ville in Paris to Château de Versailles and back. That route covers roughly 1,430 feet of elevation gain—six times more climbing than Berlin and nearly twice as much as Boston.
Every major marathon that Kipchoge has won, including those at the past two Summer Olympics, features a flat course. This isn’t to say that Kipchoge is incapable of winning on a more technical marathon—He trains in the highlands of Kenya’s Rift Valley on trails nicknamed “Boston” for their rolling hills. It’s just that he has never tried.
“Of course it is good for him to adjust a little bit more to hilly courses,” Hermens said, adding that “a gold medal is priority number one” for Kipchoge.
Depending on how Kipchoge fares on Monday morning, he might take one more crack at a hilly course in the fall should he choose to race the New York City Marathon. Hermens wouldn’t confirm Kipchoge’s fall racing plans, but suggested that Berlin, or a course-record-setting attempt at Chicago are on the table. So is New York, the last major on Kipchoge’s absurd bucket list.
“I don’t even want to participate in the six World Marathon Majors,” Kipchoge told a newspaper in Kenya last year. “I want to participate and win all the six.”
Harvard/Griffin: skewed distribution of endowments favours educational elite
Studies show relatively few students of modest means enrol at top US institutions
When it comes to philanthropy, Ken Griffin is not exactly a value investor. The multi-billionaire, who made his fortune as a hedge fund founder and market maker, this week gave $300mn to his alma mater, Harvard University. Overall, Griffin has donated more than $500mn to the Massachusetts-based school.
The gift drew criticism from some students and alumni irked that Griffin has backed political candidates deemed hostile to higher education. A more interesting question is why such a well-endowed institution deserves such generosity when so many other postsecondary institutions are needier.
Harvard Management Company’s portfolio was valued at $51bn last year. It fell by 1.8 per cent in the year to June, after soaring by 34 per cent the year before.
One area where that cash pile is useful is in financial aid. Students from families that earn less than $75,000 annually are not charged to attend Harvard. Still, studies show that relatively few students of modest means enrol at elite US institutions.
The tendency of American private colleges to accumulate and hoard resources has attracted the attention of policymakers. The 2017 Trump tax reform law imposed a 1.4 per cent tax on investment income for colleges where the average endowment per student exceeded $500,000.
Public universities, where the majority of American students end up, are still feeling the pinch of post-2008 austerity. US states on average spent 13 per cent less on students in 2018 relative to 2008. That leaves them paying far higher tuition fees than previous generations, according to the Center on Budget and Policy Priorities.
Griffin could look to another prominent philanthropist, MacKenzie Scott, the former wife of Jeff Bezos, as a role model. Scott has been rapidly giving her portion of the Amazon fortune away. Recipients include modestly-resourced schools. They could otherwise only dream of amassing an endowment large enough to pay taxes.
Is the $12tn private market the ‘next shoe to drop’?
O Lord make me mark properly, but not yet
Nothing in finance has been hotter than private capital over the past decade — with growth even surpassing that of passive investing — but some think a reckoning is now coming.
This is the theme that Jefferies analyst tackle in a report they published earlier today, titled Alts: The Next Shoe to Drop? Obviously, the sellside gonna sell, so Jefferies’ analysts put a positive spin on things:
As investors scan financial markets for the “next shoe to drop”, some fear it might be found in the $12tn private markets. There are legitimate areas of concern from the impact of higher rates, to the appropriateness of asset marks and potential reversals in favourable allocation tailwinds. Inevitably, there will have been pockets of over-exuberance, but we think listed alts firms are likely to prove considerably more resilient than they are given credit for.
That’s the general tone of the entire report. “Still early innings for alts firms looking to tap retail channels,” for example. Or “recent survey data suggests asset owner demand trends are robust”. It may not surprise you to learn that private equity firms in particular are mammoth fee-payers to investment banks.
However, the report does a good job of running through a lot of the interesting issues that confront private, unlisted markets and the firms that invest in them. And there are a LOT of things going on right now.
First of all, higher bond yields simply make all alternative assets less compelling. One of the biggest drivers of the trillions of dollars that have gushed into private capital in recent years is the yield evaporation that took place in fixed income, which forced many investors to take on more risks to hit their return bogeys.
That has now changed radically. Two years ago, you’d only get a 4 per cent average yield from US junk bonds — today you can get more than that in Treasury bills. The implications for asset allocators is huge.
Jefferies highlights what BlackRock’s Rob Kapito told analysts on the investment company’s third-quarter earnings call:
“If we go back to 1995, [in order] to get a 7.5% yield, which is what many institutions are looking for, a portfolio could be in 100% [invested in] bonds. If you fast-forward 10 years, in 2005, it had to be 50% bonds, 40% equities and 10% alternatives. Then move another 10 years and in 2016, you [could allocate] only 15% bonds, 60% equities and 25% alternatives. [ . . .] Now today to get that same 7.5% yield, a portfolio could be in 85% bonds and then 15% equities and alternatives.”
Kapito followed up on this at a conference in February, pointing out that:
. . . “Today, you can be 100% [invested] in bonds and get that 7.5% [target] return. And in fact, you can take the least amount of credit risk and the least amount of duration of price risk and get an 8% or 9% return in the shortest part of the curve where rates are. Not taking advantage of this is not doing a service for your clients.”
Secondly, a lot of truly dumb stuff happened when fundraising went parabolic and everyone could flip utter dross substandard companies to public markets through SPACs. This was most obvious in venture capital and growth equity, but there are probably some hilarious snafus lurking in many private debt and equity portfolios as well. Commercial real estate now also looks . . . dicey.
Jefferies notes that private capital allocations to technology and healthcare have been steadily increasing for the past two decades, That means that portfolios will be less stable than in the past, when duller, less cyclical companies dominated more. And prices paid crept up.
The investment bank’s analysts are sanguine over the danger of more “realistic” marks on private investments, noting that the pressure from auditors is usually the most intense around the fourth-quarter/end-of-year repots, which are now in the rear-view mirror.
As a result, “we would suggest that any immediate concerns of cliff-edge mark-downs are misplaced, particularly given little time pressure to dispose of asset at unfavourable valuations”.
But Jefferies does highlight Bain’s finding that valuation expansion accounted for over half of private equity’s returns in recent years. That kind of dumb beta uplift is trickier now.
It seems less likely that this benefit will persist in the coming years (although the downturn may offer some opportunity of attractive entry valuations), particularly if rates remain at elevated levels. This inevitably means that returns will need to be generated by revenue growth and margin expansion.
Thirdly, the flood of money that went into private markets is drying up, even forcing some financiers to swallow any ethical qualms they may have and go looking for money in new areas. “The Four Seasons in Riyadh is basically Palo Alto,” one VC told our mainFT colleagues recently.
Jefferies highlights a BlackRock client survey that indicates that a decent share of investors are still looking to increase their allocations to private capital funds (and only a minority looking to pare back).
However, the subsequent slump in public markets and the (cough) remarkable resilience of private marks mean that most investors are probably at or well above their allocations. The global average is now 24 per cent, which is astonishing.
The problem is, therefore, that private-capital investors kinda need private-capital firms to move their marks to nearer public market valuations. But if private-capital firms do that, they will make a lot of those long term IRR numbers they bandy about look a lot less sexy.
Research Calls
- Upgrades:
- Casey's General (CASY) upgraded to Buy from Neutral at Northcoast; tgt raised to $270
- DouYu (DOYU) upgraded to Neutral from Underweight at JP Morgan; tgt raised to $1.20
- Hello Group (MOMO) upgraded to Overweight from Neutral at JP Morgan; tgt raised to $13
- HUYA (HUYA) upgraded to Neutral from Underweight at JP Morgan; tgt raised to $3
- Mosaic (MOS) upgraded to Equal Weight from Underweight at Barclays; tgt raised to $54
- Sallie Mae (SLM) upgraded to Buy from Neutral at Compass Point; tgt $18
- V.F. Corp (VFC) upgraded to Buy from Sell at Goldman; tgt raised to $27
- Downgrades:
- Cenovus Energy (CVE) downgraded to Sector Perform from Sector Outperform at Scotiabank
- Check Point Software (CHKP) downgraded to Mkt Perform from Outperform at Raymond James
- Hecla Mining (HL) downgraded to Neutral from Buy at ROTH MKM; tgt raised to $6.25
- Infosys (INFY) downgraded to Neutral from Outperform at Credit Suisse
- Orion Engineered Carbons (OEC) downgraded to Neutral from Overweight at JP Morgan; tgt $26
- Rivian Automotive (RIVN) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $15
- Steris (STE) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $197
- ViewRay (VRAY) downgraded to Hold from Buy at Stifel; tgt lowered to $1.75
- ViewRay (VRAY) downgraded to Neutral from Buy at BTIG Research
- Others:
- Altria (MO) resumed with a Buy at Stifel; tgt $52
- Arcellx (ACLX) initiated with an Outperform at Robert W. Baird; tgt $39
- Archer-Daniels (ADM) resumed with an Outperform at BMO Capital Markets; tgt $100
- Axonics Modulation (AXNX) initiated with a Buy at Mizuho; tgt $75
- BellRing Brands (BRBR) resumed with a Buy at Stifel; tgt $39
- Beyond Meat (BYND) resumed with a Market Perform at BMO Capital Markets; tgt $16
- Bunge (BG) resumed with an Outperform at BMO Capital Markets; tgt $120
- Campbell Soup (CPB) resumed with a Hold at Stifel; tgt $55
- Carisma Therapeutics (CARM) initiated with an Outperform at Robert W. Baird; tgt $10
- Conagra (CAG) resumed with a Hold at Stifel; tgt $43
- Darling Ingredients (DAR) resumed with an Outperform at BMO Capital Markets; tgt $80
- Green Plains (GPRE) resumed with a Market Perform at BMO Capital Markets; tgt $33
- Hershey Foods (HSY) resumed with a Hold at Stifel; tgt $243
- Ingredion (INGR) resumed with a Market Perform at BMO Capital Markets; tgt $115
- Inspire Medical Systems (INSP) initiated with a Buy at Mizuho; tgt $300
- J.M. Smucker (SJM) resumed with a Hold at Stifel; tgt $168
- Kellogg (K) resumed with a Hold at Stifel; tgt $71
- Kraft Heinz (KHC) resumed with a Buy at Stifel; tgt $44
- Lamb Weston (LW) resumed with a Hold at Stifel; tgt $115
- LivaNova (LIVN) initiated with a Neutral at Mizuho; tgt $48
- LiveOne (LVO) initiated with a Buy at ROTH MKM; tgt $2.80
- McCormick (MKC) resumed with a Hold at Stifel; tgt $82
- Mondelez Int'l (MDLZ) resumed with a Buy at Stifel; tgt $78
- Nevro (NVRO) initiated with a Neutral at Mizuho; tgt $40
- Philip Morris International (PM) resumed with a Buy at Stifel; tgt $114
- Pilgrim's Pride (PPC) resumed with a Market Perform at BMO Capital Markets; tgt $26
- Post (POST) resumed with a Buy at Stifel; tgt $106
- ResMed (RMD) initiated with a Buy at Mizuho; tgt $255
- Shift4 Payments (FOUR) initiated with an Equal-Weight at Stephens; tgt $80
- Simply Good Foods (SMPL) resumed with a Buy at Stifel; tgt $41
- Sovos Brands (SOVO) resumed with a Buy at Stifel; tgt $19
- Toast (TOST) initiated with an Equal-Weight at Stephens; tgt $18
- TreeHouse Foods (THS) resumed with a Hold at Stifel; tgt $53
- Tyson Foods (TSN) resumed with a Market Perform at BMO Capital Markets; tgt $66
- Vital Farms (VITL) resumed with a Buy at Stifel; tgt $18
- Westrock Coffee Company (WEST) resumed with a Buy at Stifel; tgt $14