FT : European football gears up for new fight over money

European football gears up for new fight over money

Sharing the spoils: Europe’s top football clubs dismiss domestic complaints

When it comes to revenue growth, the Premier League usually dominates the headlines. But European club competitions are becoming increasingly productive cash cows for those that participate. Recent broadcast deals for Uefa’s Champions League have notched up significant increases, especially in the US market. The pot of cash to be spread across Europe is getting bigger and bigger.

That’s good news for the kind of clubs involved in the ECA — an increasingly powerful grouping headed by Nasser el-Khelaifi, the Qatari chair of Paris Saint-Germain.

The ECA has been on a push to increase its reach with the launch of the ECA Network, which will extend some of the group’s services to as many as 160 “aspiring” clubs. It was also the driving force behind the creation of the Europa Conference League, a new competition designed to give more teams the chance to play against their counterparts across the continent.

But not everyone is happy. Some at the domestic leagues fear that the growing gap between those who qualify for Europe and those who don’t risks distorting competition at home. They look at places like Croatia, where Dinamo Zagreb have won all but one league title since 2005, or the Bundesliga — where Bayern Munich are gunning for an 11th consecutive championship. The snowball effect of continued participation in the Champions League in particular is pushing the bigger clubs further and further ahead, they warn. As domestic competition wanes, so will interest from broadcasters.

But the ECA members aren’t buying it. They point to the Champions League results — where the opening few fixtures have shown how teams across Europe are still very capable of winning against deep-pocketed rivals, especially those from the Premier League. The ECA members also note that money generated from European competitions is already being shared with non-participants, and is becoming an increasingly important revenue source for clubs in smaller countries.

“European competitions are the ones that keep the balance right. It’s the big five countries’ domestic TV revenues that changes the competitive balance”, said Aki Riihilati, chief executive of HJK Helsinki and ECA vice-chair.

So while the leagues point the finger at the big clubs in the ECA, the clubs say the big leagues just aren’t doing their bit to share the spoils at home. This looks like a row that is just heating up.

NY Post : Billionaire bunkers: How the world’s wealthiest are paying to escape r

Billionaire bunkers: How the world’s wealthiest are paying to escape reality

The ultra-wealthy are buying high-end bunkers with resort-like amenities where they can live in luxury while the world outside collapses.
When civilization collapses, J.C. Cole will be ready.
He’s founded Safe Haven Farms, a maximum security compound to ride out the next pandemic or climate-change disaster. And those who can afford to join him will also have a shot at survival, he promises. But the price tag isn’t cheap.
A $3 million investment in his startup isn’t just about getting admission. Members “also get a stake in a potentially profitable network of local farm franchises that could reduce the probability of a catastrophic event in the first place,” writes Douglas Rushkoff in his new book, “Survival of the Richest: Escape Fantasies of the Tech Billionaires” (W.W. Norton).
Cole, 66, has two farms in development, one outside Princeton and the second somewhere in the Poconos, which he envisions as “a network of secret, totally self-sufficient residential farm communities for millionaires, guarded by Navy SEALs armed to the teeth,” writes Rushkoff.
Google co-founder Larry Page gained New Zealand residency in 2021. The country has become an escape hotspot for those looking to plan ahead in the event of disaster.
FilmMagic
The developer, who says he’s not independently wealthy but “did well in real estate,” won’t share the exact locations of either farm, at least not to outsiders, nor will he pose for photos — as his concerns about security and the end of the world rides high.
“The majority of Americans do not have an insurance policy by their choice,” Cole told The Post. “If/when the supply chain collapses, these people will not have food. A certain percentage of them will break the law and do whatever possible to get food. Therefore we want to remain ‘not findable.’ ”
This underground bunker offers all the amenities of a 5-star hotel, and is made by Oppidum, a supplier of fortified underground residences.
Courtesy of Oppidum/Mega
Cole is far from alone. The world’s richest are increasingly “insulating themselves from the very real and present danger of climate change, rising sea levels, mass migrations, global pandemics, nativist panic, and resource depletion,” writes Rushkoff.
And while many billionaires have claimed that their interests are in saving the world—sometimes they even get into pissing matches on social media about who is more benevolent — Rushkoff argues that the ultimate goal of the super-rich is to protect themselves.
An Oppidum bunker designed by French architect Marc Prigent.
Courtesy of Oppidum/Mega
For the wealthy and privileged, writes Rushkoff, the future of technology is about “only one thing: escape from the rest of us.”
And they’re escaping in style. Texas-based Rising S Company sells luxury bunkers that run up to $9.6 million for the “Aristocrat” model — which comes with a private bowling alley, swimming pool, “bullet-resistant” doors and a “motor cave exit,” so you can sneak out for errands like Batman.
Peter Thiel reportedly made a deal with entrepreneur Sam Altman to escape via private jet to Thiel’s New Zealand compound at the first sign of societal collapse.
Getty Images
California-based company Vivos sells luxury underground apartments, converted from Cold War missile silos and storage facilities into “miniature Club Med resorts,” writes Rushkoff.
Ultra-elite shelters like The Oppidum in the Czech Republic—billed as “the largest billionaire bunker in the world”—include amenities like simulated natural sunlight, a wine vault, and a place to hide all your stuff that’s “impregnable” to hostile outsiders.
The Oppidum hideaway in the Czech Republic has it all, including huge garages where residents can store their luxury vehicles.
Courtesy of Oppidum/Mega
“You’ve worked hard over many years, taken risks, seized opportunities, made your vision a reality,” the company’s website tells its billionaire customers. “Your reward is the means to acquire and curate all the beautiful, rare and precious objects you desire.”
Luxury yachts large enough to be a billionaire Noah’s Ark are seeing huge surges in sales— 887 superyachts were sold globally in 2021, a 77% increase from the previous year — and Amazon founder Jeff Bezos, 58, even commissioned a smaller companion yacht for his main superyacht, as a separate space to store his helicopter.
Jeff Bezos commissioned a smaller companion yacht to his main super yacht, as a place to store his helicopter.
Image Press/BACKGRID
New Zealand has become a prime destination for billionaires seeking doomsday refuge, from Google co-founder Larry Page, 49, to Silicon Valley entrepreneur Sam Altman, 37, who let it slip in a 2016 interview that he and PayPal cofounder Peter Thiel had a mutual agreement to escape to Thiel’s New Zealand compound via private jet at the first sign of society’s collapse. (Thiel’s owned the property since 2011 but hadn’t made the news public.)
But the billionaire bunker, whether on land, sea or someday (ostensibly) on another planet entirely, is at best a temporary fix, “less a viable strategy for apocalypse than a metaphor for this disconnected approach to life,” writes Rushkoff. “Like a hiding toddler who thinks holding their hands over their eyes can prevent them from being seen,” the billionaires who rely on a safe haven from the outside “are in for a surprise.”
This superyacht owned by Roman Abramovich is one way to ride out an apocalypse.
Getty Images
Thiel discovered this recently when the 54-year-old entrepreneur — worth an estimated $7.4 billion — learned that his plans to build a 477-acre “doomsday” home overlooking Lake Wānaka in New Zealand was being blocked by environmental groups.
Even the preexisting bunkers offer only nominal protection, and the probability of one of them “actually protecting its occupants from the reality of, well, reality, is very slim,” writes Rushkoff. Whatever threat they’re trying to escape — toxic clouds, plague and radiation — it all has a way of “spreading and seeping through the most well-thought-out barricades.”
The Oppidum in the Czech Republic claims to be the world’s largest bunker for billionaires, boasting simulated sunlight to ease the underground drudgery, “impregnable” storage space and a wine vault.
Courtesy of Oppidum/Mega
Cancer-causing microplastics “are as plentiful in the polar ice as they are in the typical European town,” Rushkoff continues. “There is no escape.”
But survival may not be their only rationale for disappearing. The “seasteading” movement— a “Minecraft-meets-Waterworld future,” Rushkoff writes, in which the wealthy live in independent, free-floating cities — is not just about “aquapreneurs” escaping the dry-land apocalypse. It’s also about creating a new ultra-libertarian civilization free from taxes, anti-monopoly regulations, and meddling politicians.
Set on a former US Army base, Vivos xPoint consists of 575 private military-built bunkers — some equipped with pool tables.
Terra Vivos X point
As the Seasteading Institute website explains, “We’ve had the agricultural revolution, the commercial and industrial revolutions, but why not a governance revolution? Enter the sea.”
If they can’t find sanctuary for their bodies, they can still outsmart the end of the world by having their minds preserved. Silicon Valley tech billionaire Altman paid $10,000 to startup company Nectome just to be on the waiting list to have his brain uploaded to a computer.
‘[It’s about] only one thing: Escape from the rest of us.’
“Survival of the Richest” author Douglas Rushkoff, on post-apocalyptic planning
Who joins Altman (or has already joined him) remains to be seen. This past July, Dogecoin creator Shibetoshi Nakamoto asked his followers on Twitter if they’d ever “upload your brain to the cloud,” and Elon Musk, 51, cryptically responded, “Already did it.“
Before coming to the United States, Cole spent 18 years in Eastern Europe, serving as a former president of the American Chamber of Commerce in Latvia in Northern Europe. He witnessed firsthand the collapse of the Soviet Union, and he insists we should be learning from the Soviets’ mistakes.
The Vivos xPoint complex seen from ground level. The former US Army base is the size of a small city.
Terra Vivos X point
“I am deeply concerned with what I see happening in Europe, especially with energy and food,” he said. “That can easily happen here.”
His biggest concern isn’t a violent confrontation with the armed mob on the other side of the fence. It’s “the woman at the end of the driveway holding a baby and asking for food. I don’t want to be in that moral dilemma,” he told Rushkoff.
“xPoint: The point in time at which only the prepared will survive,” proclaims the Vivos xPoint company website, which advertises bunker showrooms like this one.
Terra Vivos
“The mindset that requires safe havens is less concerned with preventing moral dilemmas,” writes Rushkoff, “than simply keeping them out of sight.”
Cole hopes Safe Haven doesn’t just provide protection from those wealthy enough to afford it but becomes a prototype of how sustainable farms can be used to make sure everybody has enough food to eat and protection from the elements.
He won’t reveal exactly how many wealthy investors he has, but he does claim the farm’s community will be evenly split between the rich and those with skill sets to “rebuild the country,” including doctors, machinists, and security.
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What do you think? Post a comment.
But Cole’s ultimate goal, writes Rushkoff, is to ensure “there are as few hungry children at the gate as possible” when the time comes to lock down.
“The mindset that requires safe havens is less concerned with preventing moral dilemmas,” writes Rushkoff, “than simply keeping them out of sight.”

Barrons : Elliott Is the Last True Big Activist. What Investors Should Know.

Elliott Is the Last True Big Activist. What Investors Should Know.

For much of this year, PayPal Holdings stock couldn’t find a floor. Not only did the payments company lose its pandemic luster, but it also lost credibility on Wall Street after cutting ambitious growth targets in February. Amid the selloff, PayPal’s chief financial officer took a job at Walmart. Investors took off, too, sending the stock down 60% through mid-July.

But one investor, in particular, saw value and came equipped to orchestrate a turnaround in the stock: Elliott Management.

Led by its longtime chief, Paul Singer, the $56 billion hedge fund amassed a nearly 2% stake in PayPal (ticker: PYPL) over the summer. As reports of Singer’s involvement trickled out, PayPal shares popped 9% and then rose another 12% when the company said it was engaged in “constructive and collaborative” talks with the hedge fund.

Singer, 78, isn’t known for playing nice if he’s rebuffed. A Harvard University–trained lawyer, he has led Elliott for more than four decades, developing a reputation for tenacious activism, tackling companies worldwide and even taking on an entire country over its debt. Worth $5.5 billion, according to Forbes, Singer is still highly involved in the fund, with co-CEO Jonathan Pollock. Managing partner Jesse Cohn oversees much of the firm’s private equity and activism.

Few other hedge funds are targeting as many large and global companies. Fewer still are willing to fight for years if a company resists Singer’s demands—from winning board seats to a wholesale firing of the management team or corporate breakup.

Yet investors who follow Elliott into a stock may be disappointed. Strip out the one-day pop in a stock when Elliott’s involvement is disclosed, and, in aggregate, its activist picks haven’t beaten the market, according to an analysis by Barron’s.

For Elliott, that may not be a problem because the fund lives up to its name: It hedges risks in activist holdings both widely and narrowly, down to the business unit within a company that it is targeting. Those strategies aren’t accessible to most investors.

Activist positions, moreover, only account for about 20% of the hedge fund; the rest consists of derivatives, debt securities, and other positions that aren’t publicly disclosed. All of it together gives Elliot a leg up in activism. Investors who try to piggyback off its strategy should be wary.

As for Elliott’s overall returns, they’re a mixed bag. The hedge fund has gained an average 13.5% annualized since Singer founded the firm in 1977, according to people familiar with the fund. That beats the S&P 500 index’s 11.6% return. Elliott has had only two losing years: 1998, when it lost 7% while the S&P 500 gained 28%, and 2008, when the fund lost 3% against a 37% market decline.

Elliott has done quite well this year. Through June 30, the hedge fund was up 5%, net of fees, against a 20% decline in the S&P 500.

But Elliott’s performance hasn’t been great over the past five years. The fund returned an annualized 9.7%, through June 30, compared with 11.3% for the S&P 500. In 2019, the fund returned 6.5%, trailing the market’s 31.5% gain. Elliott also trailed the market in 2020 and 2021.

Advisors familiar with the fund, which has a $5 million minimum, say that investors aren’t necessarily looking to knock the lights out with Elliott. Rather, they’re seeking a true multi-strategy fund that can deliver returns noncorrelated to the broader market.

Cohn says avoiding losses is the first objective. “Elliott’s core value is to preserve capital with no excuses and be skeptical,” he said in an interview with Barron’s.

Singer declined an interview.

Elliott’s Activist Playbook
Led by Singer, Elliott is leaning into activism while many of his peers pull back. Bill Ackman, known for his short campaign against Herbalife Nutrition (HLF), said in March that his Pershing Square is officially out of activist short selling and will be taking a “quieter” approach to investing. Earlier this month, Third Point’s Dan Loeb did an about-face on Walt Disney (DIS) after CEO Bob Chapek shot down Loeb’s quasi-friendly nudge to split off ESPN.

In contrast, Elliott isn’t backing down. The hedge fund, in the past year, has taken activist stakes in PayPal, Pinterest (PINS), Cardinal Health (CAH), Western Digital (WDC), Suncor Energy (SU), and Switch (SWCH). Globally, the hedge fund’s targets include Swedish Match (SWMA.Sweden), Toshiba (6502.Japan), Willis Towers Watson (WTW), and Canadian National Railway (CNI).

Elliott is also using activism—gaining board seats and internal company knowledge—for buyouts. The hedge fund took the transport company Cubic private last year and has a buyout deal for Citrix Systems (CTXS). It took Athenahealth private with Veritas Capital for $5.7 billion in 2018 and sold it to Bain Capital and Hellman & Friedman for $17 billion in February.

“The more effective we are in activism, the better that we can deploy those skills into acquiring companies,” said Cohn. “The more we do in the private equity space, the more operational knowledge we build, and the more effective we can be as public-market players.”

Overall, Elliott has launched 131 activist campaigns since 2015, according to data from investment advisory firm Lazard . That eclipses the sum of campaigns launched by the next three most active hedge funds: Starboard Value, Land & Buildings, and ValueAct Capital. Elliott has gained 95 board seats since 2015, lagging behind only Starboard with 125 seats over the same period, according to Lazard.

Elliott often starts out friendly but can quickly turn hostile; it has a reputation for latching on to companies or even entire countries like a pit bull. Singer tangled with giants like Athenahealth and steel company Arconic (ARNC). His hedge fund feuded with Argentina over its bonds for 15 years, even detaining an Argentine naval vessel at a port in Ghana as a pressure tactic. Elliott eventually settled with Buenos Aires, turning a $2.4 billion profit on a $115 million investment.

Partly in response to activists like Elliott, many companies have adopted defenses like share dilution provisions and other “poison pills” to thwart hostile actions. “It’s no longer the early innings of activism,” says Chris Couvelier, managing director at Lazard. “Even if your company hasn’t been targeted, odds are you’ve got a director or member of management that has been affected by activism.” Investors, meanwhile, are getting tired of headline-making proxy brawls. “Shareholders don’t mind alternative ideas, but they want to evaluate them on their own merits,” he adds.

Elliott’s Activist Record
Whether Elliott enhances returns for shareholders—other than itself—is debatable.

Since 2018, the 76 activist stock positions publicly disclosed by Elliott have returned an average of 4.9% in the hedge fund’s holding period, according to Bloomberg reports and data. That trails the S&P 500 by an average of 6.6 percentage points. Investors would have fared even worse if they’d missed the initial one-day gain, averaging 5.6%. Without it, Elliott’s picks would have trailed the S&P 500 by 11.9%.

Elliott’s stock returns are based on public filings and company disclosures. Some of its positions—particularly some foreign holdings—may not have been activist but rather arbitrage trades and hedges. Filtering out foreign holdings, the firm’s U.S. activist holdings beat the S&P 500 by six percentage points. Investors who missed the first-day gain would have trailed by two points. Elliott declined to comment on Barron’s findings.

A few recent examples exemplify the uneven performance. Western Digital surged 14.5% on the day that Elliott’s stake was revealed in May. The company reached a settlement with Elliott a month later and agreed to explore a breakup—work it is still undertaking. Shares have since slid and trailed the S&P 500 by 27% since the disclosure of Elliott’s stake.

Following Elliott into shares of SoftBank Group (9984.Japan) would also have been costly. Elliott amassed a $3 billion stake in the Japanese tech conglomerate, revealed in early 2020, and then lobbied management for more disclosures about its positions, among other demands. Initially, investors cheered, pushing up SoftBank stock by 7.3%. But Elliott abandoned efforts to exert pressure on SoftBank CEO Masayoshi Son and sold most of its stake in the company. SoftBank stock has trailed the S&P 500 by 10% since Elliott’s stake was revealed.

Some companies targeted by Elliott say they don’t view the hedge fund as an adversary. Elliott approached the data center Switch cordially, alerting management via a phone call that it acquired a stake and would like to talk. Switch President Thomas Morton was wary, but said in an interview that Elliott had “done its homework.” Elliott and Switch were aligned in some goals, he added, including converting the company into a real estate investment trust. “We didn’t think of them as an activist but as an additive investor,” said Morton.

Other companies, perhaps wary of tangling with Elliott, appear willing to appease the firm. Elliott sought five seats on Cardinal’s 11-person board in mid-August. Three weeks later, Cardinal agreed to add four directors backed by the hedge fund to its board. Cardinal also formed a committee to explore the company’s strategy and improve financial performance, meeting some of Elliott’s demands.

As for Pinterest, Elliott now has a 9% stake in the social-media and e-commerce site. The hedge fund wants to see the company accelerate efforts to monetize its base of 433 million monthly users—or put itself up for sale, according to a person familiar with Singer’s demands. Both Elliott and Pinterest have said they’re engaged in a “collaborative” dialogue. The fact that Elliott owns stakes in both PayPal and Pinterest has raised prospects of the hedge fund brokering a merger, though people close to both companies say a deal isn’t on the table. A spokesman for Elliott denied it was pushing for a sale of Pinterest but declined to comment further.

Inside a $56 Billion War Chest
Fans of Elliott say it is misunderstood and unfairly maligned. Yes, it gets a lot of attention for hardball tactics in activist campaigns. But as a multi-asset fund, Elliott uses a range of instruments to achieve returns, including equity, debt, and derivatives. It also has the resources to fight for years in court, tackling bankrupt companies like Caesars Entertainment, and countries like Peru.

It’s quite likely that the hedge fund scores profits on its stakes that aren’t available to piggybacking investors. The initial pop certainly helps Elliott. But Elliott mitigates its risks, partly by isolating a business unit within a company and hedging its exposure to the rest of the business or industry. While it looks as if Elliott is targeting a conglomerate like AT&T (T), for instance, it may be seeking a spinoff of the satellite business and would hedge its exposure to the telecom side.

“Elliott is probably the best hedging firm out there,” says a person familiar with the fund. “They hedge down to the business line, as deep as they can, using any instrument they can find to take out the risks that don’t relate to what they’re trying to accomplish. They can do things that other activists can’t, because they’re not taking the same kind of risk.”

With more than $50 billion in assets and 500 employees, Elliott towers over rivals like Third Point and Pershing Square. The fund’s size enables it to borrow stock, for shorting positions, at ultra-low fees. Elliott can also hedge its exposures with custom-made instruments, such as credit-default swaps, at very low costs.

“Their size allows them to hedge more effectively so they can take riskier positions,” said the person familiar with the fund. Moreover, Elliott relies on in-house industry experts who can push back against financial models, providing more insight into a company or sector that the numbers might suggest. “They are not resource constrained,” said one advisor who regularly works with the firm.

At 78, Singer won’t always lead the activist fights, though he seems to have built a firm with the resources to prevail. “We find value where we believe others have missed it,” said Cohn. “I would say this is our type of market for finding opportunities.”

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: This year, Barron’s annual healthcare roundtable focuses on emerging themes across the industry

Cover Story:
-This year, Barron’s annual healthcare roundtable focuses on emerging themes across the industry, from the ability to “interrogate” biology with computational tools to the evolution of value-based care. The challenges are many, but the news is good, not only for innovative biotech and cash-rich pharmaceutical companies, but also for nimble managed-care providers and purveyors of much-needed medical devices and life-sciences tools.

Tech Trader:
-One of this year’s most surprising tech deals was the acquisition of the movie-rental kiosk chain Redbox by Chicken Soup for the Soul Entertainment. Don’t let the name fool you: Chicken Soup for the Soul is a video-streaming company that just happens to have grown out of the popular book series. Today, Chicken Soup owns Crackle and other ad-supported video-streaming services. The Redbox deal gives the business some real scale, and it has turned the company into a bargain-bin small-cap bet on the future of video—one that the market is largely ignoring.

The Trader:
-The S&P 500SPX –1.72% index fell to a three-month low this week, down 4.6%. Growth stocks were hardest hit as the Nasdaq Composite slid 5.1%. The Dow Jones Industrial Average finished the week down 4.0%—its lowest close of 2022 and on the cusp of a bear market, down 19.6% from its all-time high. Meanwhile, the Federal Reserve’s interest-rate hike on Wednesday, and its hawkish projections, sent the two-year Treasury note yield to a fresh 15-year high, at 4.21%, as prices tumbled. Oil hit its lowest level since January on Friday, at $78.74/bbl, reflecting concerns about the global economy.
-Costco stock slipped 2.6% in after-hours trading on Thursday, because investors were hoping for a more than they got from the retailers earnings.
Costco posted net income of $1.87 billion for the quarter, or $4.20 a share, slightly better than analysts’ consensus for $4.17/share. Sales were $70.8B. That Costco pulled off a beat shouldn’t be shocking. Between its long history of upbeat earnings and robust monthly sales updates—the last of their kind among the major retailers—Costco Wholesale’s (COST) quarterly earnings results typically don’t include many surprises. That was true of its fiscal fourth quarter as well: We already learned earlier this month that the quarter’s comparable sales were up double digits when it provided its August update.

Features:
-High-yield bonds are finally living up to their name after the broad selloff in fixed-income markets this year. Better known as junk, the $1.5T sector looks appealing, as yields have risen to an average of 8.8% from 4.4% at the start of 2022, according to the ICE BofA US High Yield Index. Junk debt offers an alternative—or supplement—to stocks. Junk bonds aren’t without risk. The ICE index had a negative total return of 12.6% in 2022 through this past Thursday, though that’s better than the 20% decline (including dividends) of the S&P 500. And many investors understandably balk at buying debt of leveraged companies heading into a potential recession.
-Ford Motor stock tumbled this past week after the company warned of continued parts shortages, but Wall Street doesn’t seem worried—and neither is Barron’s. In a Monday disclosure, Ford said it won’t be able to finish 40,000 to 45,000 higher-margin trucks and sport utility vehicles it had planned to produce by the end of the third quarter. The company said the output shortfall, combined with $1B in higher-than-expected costs, would result in a quarterly operating profit of about $1.4B to $1.7B, well below analyst forecasts for $2.9B.

European Trader:
-Russia’s invasion of Ukraine unraveled the European energy markets this year. The sudden shortfall of natural gas is raising fears about how the region will cope with sky-high prices. SSE (formerly: Scottish and Southern Energy), once one of the United Kingdom’s famous Big Six power providers, may nevertheless be in good shape after selling off its retail business and focusing on renewables ahead of the crisis. It now relies relatively less on gas for power generation, while still being able to take advantage of higher wholesale power prices. SSE isn’t exposed to households’ ability to pay whopping heating bills. And the company’s outlook brightened after new Prime Minister Liz Truss ruled out a windfall tax on profitable energy firms.

Emerging Markets:
-Brazilian markets aren’t supposed to thrive on the eve of a presidential election. Especially when the rest of the world is going to hell in a handbasket. Particularly when the incumbent, far behind in the polls, threatens a Trump-style stop-the-steal campaign, with military backing. The iShares MSCI Brazil exchange-traded fund has climbed by nearly a quarter over the past two months. The S&P 500 is down 2% during that period. The Brazilian Real is up 7% against the dollar, while other currencies wilt.

Commodities:
-Natural-gas prices have seen a steep decline from their peak last month, likely providing an opportunity for investors ahead of the winter heating season. “The market has greater confidence that Europe will have sufficient gas supplies to get through winter without running out of gas,” says Rodney Clayton, portfolio manager for the Virtus Duff & Phelps Select MLP and Energy fund. As of Sept. 19, the European Union’s working gas in storage stood at 960.26 TWh, which is at 86% full, according to data from the Gas Infrastructure Europe’s Aggregated Gas Storage Inventory.

Streetwise:
-Jack Hough thinks you should look at falling stock prices and higher interest rates as with some relief. “It might not be great, but it’s normal. Stocks and bonds are tumbling. Housing has weakened. And I haven’t heard a word about nonfungible cartoon monkey tokens in maybe three months. Strategists are now turning to truly bizarre assets—two I spoke with this past week recommended purchasing long-term Treasurys. One also said to favor shares of companies that generate cash, and he wasn’t talking about Bitcoin mining. I don’t want to set off a panic, but financial markets appear to be careening toward normal. If left unchecked, ordinary assets could soon reach price levels that imply adequate long-term returns.’

Barrons : Mergers Might Be Getting Easier. Here Are the ‘Arb’ Stocks to Watch.

Mergers Might Be Getting Easier. Here Are the ‘Arb’ Stocks to Watch.

UnitedHealth Group ’s $13 billion acquisition of health-tech firm Change Healthcare is a go, after a federal judge ruled against the Justice Department’s antitrust challenge to the deal—and there are other merger deals that could get the green light in the months ahead.

Change stock (ticker: CHNG) jumped some 7% this past Tuesday and Wednesday, to $27.21. That’s a hair below the acquisition price of $27.75 per share in cash. The stock had traded largely between $20 and $24 since the deal was struck, reflecting investors’ collective uncertainty about whether or not it would close. UnitedHealth (UNH) struck a deal with Change way back in January 2021 and the Biden administration sued to block the deal in February 2022.

Those who bought Change stock betting on the deal eventually closing can soon pocket the difference. It’s an example of a strategy called merger arbitrage, which provides a yield opportunity that isn’t correlated with the direction of the stock market or interest rates.

Most M&A targets see their share price quickly converge with the buyer’s offer. For example, shares of insurer Alleghany (Y) were recently trading at around $842.85 per share, versus the all-cash acquisition price of $848.02 agreed with Berkshire Hathaway (BRK.A, BRK.B). That’s a discount of less than 1% to the transaction value.

But when there’s uncertainty surrounding a deal—possibly due to an antitrust challenge, concerns about financing, or major shareholder opposition—the target’s shares may trade at a meaningful discount to the agreed-upon price. It leaves an opportunity for investors willing to take the risk that the deal will close.

Not all those risks are worth taking. The most high-profile merger arbitrage opportunity these days is in Twitter (TWTR), which is fighting in court to compel Elon Musk to purchase the social-media company for $54.20 a share, or about $44 billion. Twitter stock was trading at $41.60 on Wednesday, 30% below the deal price.

That’s a tough one to handicap. Musk isn’t your average buyer, and the risk to the stock is substantial should the deal fall through. Since the Tesla (TSLA) co-founder publicly disclosed a 9.2% stake in Twitter on April 4, the shares are up 6%—versus a 20% loss for the Nasdaq Composite and declines of 35% and 70% for social media rivals Meta Platforms (META) and Snap (SNAP). It’s fair to say that Twitter stock would be a lot lower today if not for Musk’s potential offer.

But there are still plenty of targets to look at. Other stocks trading at meaningful discounts to their agreed-upon deal prices include Tower Semiconductor (TSEM), due to be acquired by Intel (INTC); Black Knight (BKI), due to be acquired by Intercontinental Exchange (ICE); Tenneco (TEN), due to be acquired by funds associated with Apollo (APO); Rogers (ROG), due to be acquired by DuPont (DD); Tegna (TGNA), due to be acquired by Standard General; First Horizon (FHN), due to be acquired by TD Bank (TD); and PNM Resources (PNM, due to be acquired by Avangrid (AGR).

Three look particularly interesting. The largest deal waiting for a thumbs up or down from regulators is Microsoft ’s (MSFT) $68.7 billion bid for Activision Blizzard (ATVI), valued at $95 a share. That compares with Activision stock’s $75.04 on Wednesday, a discount of almost 27%.

U.S. regulators are looking into the deal and it faces an antitrust probe in the U.K. Berkshire Hathaway’s Warren Buffett is among the investors betting that the videogame maker’s shares will close the gap. The conglomerate has increased its stake in Activision over the past year, to own some 68 million shares as of the end of the second quarter. Barron’srecommended buying Activision in July.

Other merger-arbitrage opportunities today could include shares of VMware (VMW), which has agreed to be acquired by Broadcom (AVGO) for about $61 billion. The deal includes both a cash and a stock component: VMware shareholders can elect to receive $142.50 per share in cash, or 0.252 of a Broadcom share—worth about $124.25 on Wednesday. The terms of the transaction specify that about half will be paid in stock and half in cash, meaning that shareholders may not get their preferred allocation, but instead receive a prorated payment.

A 50/50 split would value the deal at about $133.37 per VMware share, or 19% above its recent $112.50. That’s also a bet on Broadcom stock however—should the semiconductor firm’s stock fall more, the expected deal value will decline too.

Barrons : This U.K. Energy Stock Is Inflation-Proof and Geared for Green Power

This U.K. Energy Stock Is Inflation-Proof and Geared for Green Power

Russia’s invasion of Ukraine unleashed chaos in European energy markets this year. The sudden shortfall of natural gas is raising fears about how the region will cope with sky-high prices.

SSE , once one of the United Kingdom’s famous Big Six power providers, may nevertheless be in good shape after selling off its retail business and focusing on renewables ahead of the crisis.

It now relies relatively less on gas for power generation, while still being able to take advantage of higher wholesale power prices. SSE (ticker: SSE.UK) isn’t exposed to households’ ability to pay whopping heating bills. And the company’s outlook brightened after new Prime Minister Liz Truss ruled out a windfall tax on profitable energy firms.

SSE traces its roots to regional electricity boards set up in the 1940s in the Scottish highlands and southern England. After the breakup of state-backed regional energy providers under Margaret Thatcher, consolidation eventually led to an oligopoly. The Big Six, of which SSE was one of the largest, provided power to 99% of U.K. households by 2008.

In response, the government pushed to give consumers more choice in 2016, making it easier to set up a company to provide electricity and gas to homes. That increased competition, but also sowed the seeds of future problems.

The U.K. sets a ceiling for prices retail providers can charge households, which authorities adjust periodically. That smooths price changes for consumers, but distributors still have to buy the power from wholesale markets where prices are more volatile. The system was breaking down well before the Ukraine war, as the end of the pandemic pushed prices up. In September 2021, dozens of poorly hedged providers were already going bust.

The Ukraine conflict made things worse, raising the possibility that large numbers of families would be unable to pay for heating this winter as retail prices followed wholesale prices up. That ultimately led Truss to announce a two-year ceiling on power prices at an estimated cost of 150 billion pounds sterling ($175 billion) to taxpayers.

The only drama for SSE was whether the move would be accompanied by a windfall tax to pay for the support. SSE had disposed of its retail business to OVO Energy in 2018, putting an end to the Big Six in the process. Though it’s always possible for a government to change its mind, Truss’ pledge not to use a windfall tax seems to have put SSE in the clear.

Perth, Scotland–based SSE employs 10,754 workers and has a market value of £19 billion. Shares in energy supplier and power generator are up 5% this year to £17.32. Among the analyst ratings collected on FactSet , eight have the equivalent of a Buy rating the stock and two have it as a Hold. SSE fetches 14 times this year’s expected earnings and is valued in line with its peers.

Most of the company’s profit comes from power generation and its networks that distribute electricity and gas. About half of its wholesale power generation comes from wind and renewables, and it is investing heavily in more offshore wind capacity. While the prices in its distribution networks are regulated by the government, they are indexed to inflation.

The company issued a trading update on July 21, saying that the first quarter had exceeded expectations and reaffirming guidance for earnings per share of at least 120 pence for the fiscal year ending in March 2023, up from 95.4 pence last year.

“SSE’s business mix provides a favorable positioning against high inflation,” says Tancrede Fulop, an analyst at Morningstar who gives the shares a fair value of £19.30. “Since its exit from the supply business, the firm does not bear risks related to high energy prices.”

Barrons : Can We Beat Alzheimer’s? Biogen and Eisai’s Latest Drug Trial Will Off

Can We Beat Alzheimer’s? Biogen and Eisai’s Latest Drug Trial Will Offer Clues.

Biogen is getting one more crack at Alzheimer’s this fall. It’s a critical moment for the company, which recently abandoned plans to sell Aduhelm, another drug targeting the disease, after Medicare effectively refused to pay for it earlier this year.

This fall, Biogen (ticker: BIIB) and its partner Eisai (ESALY) are expected to announce the results of a large trial designed to test whether their latest Alzheimer’s drug, known as lecanemab, can slow the progression of the disease in early-stage patients.

An effective Alzheimer’s treatment would be an extraordinary development for the millions of people living with the condition—and for Biogen and Eisai. The market opportunity for drugs like lecanemab is more than $20 billion in the U.S. alone, according to a July report from Morgan Stanley.

Still, investors have learned a hard lesson from decades of Alzheimer’s failures. Gambling on a positive outcome of an Alzheimer’s trial has proved to be a bad idea, and Biogen’s beaten-down share price suggests that most investors aren’t placing that bet.

In addition to its crucial importance for Biogen, the lecanemab trial is vital for biopharma as a whole: The industry has spent three decades and untold millions chasing an Alzheimer’s theory known as the beta-amyloid hypothesis, on which Aduhelm, lecanemab, and drugs in late-stage development from Eli Lilly (LLY) and Roche Holding (RHHBY) are based.

Today, that theory is battered, if not yet broken. Repeated trials of antibody drugs that clear beta-amyloid plaques from the brain have failed to convincingly demonstrate a clinical benefit. If the lecanemab trial suffers the same fate, it will also dampen hopes for Lilly’s donanemab and Roche’s gantenerumab, both of which are the subjects of Phase 3 trials expected to report results over the next year.

This is all playing out in the shadow of the Food and Drug Administration’s approval of Aduhelm in June 2021, which came despite the vociferous opposition of a panel of FDA advisers. Biogen shares rose nearly 40% after the decision, but then fell steadily as the roadblocks between approval and commercialization became apparent. In April, the federal agency that oversees Medicare effectively refused to pay for Aduhelm, leading Biogen to end its efforts to sell the drug and announce a search for a new CEO.

Biogen shares, which traded around $270 before the approval of Aduhelm and closed at over $400 shortly afterward, are now trading around $205—nearly 40% below their price five years ago. Outside of Alzheimer’s, the picture at Biogen is grim, with sales of key products like the spinal muscular atrophy treatment Spinraza and the multiple-sclerosis drug Tecfidera dropping in the face of new competition.

“They’re in a tough spot if it doesn’t work,” says Phil Nadeau, a biotech analyst who covers the company for Cowen.

In a statement, Biogen’s chief medical officer, Dr. Maha Radhakrishnan, said the company has “always believed that defeating Alzheimer’s disease will require multiple approaches and treatment options” and is looking forward to receiving the results of the trials.

All eyes are on the lecanemab data. Investors will have a high bar for success: Not only will the results need to be good enough to please the FDA, but also the Centers for Medicare and Medicaid Services, to avoid a repeat of Aduhelm.

“It would really have to show a significant variance versus placebo for the Street to get excited, because of the historical context,” says Jared Holz, a healthcare equity strategist at Oppenheimer.

Eisai, which is running the lecanemab trial, hopes the drug will slow progression of symptoms by at least 25% compared with the placebo group, using a rating tool that measures an Alzheimer’s patient’s cognitive function and their ability to do certain daily tasks.

It isn’t clear that investors would view a 25% slowing as a home run. A slowing of more than 35% would be seen as “really striking,” says Nadeau.

Aduhelm, by contrast, showed no cognitive benefit in one Phase 3 trial; it slowed cognitive decline by 22% in a second, though the interpretation of that trial has been controversial.

Nadeau says that compelling results could drive the stock at least into the “high $200s.” Morgan Stanley analyst Matthew Harrison, in a note this month, wrote that clear results showing a 25% slowing could push Biogen stock into the $300 to $350 range. If the trial fails, he sees the shares falling closer to $160 to $180.

A failure would mark a new era for Biogen. Holz says that without lecanemab, conversation would turn to selling off pieces of the company, or pursuing a more aggressive mergers and acquisitions strategy.

Success, on the other hand, would bring a rapid turnabout. Eisai has already asked the FDA for accelerated approval of lecanemab, the same designation the agency gave to Aduhelm. A decision is due in January. If the Phase 3 data are positive, the company will ask for full approval, clearing the way for Medicare coverage.

Given the track record of similar drugs, investors would be well advised to avoid big moves until after the data are out. If the trial is positive, and the beta-amyloid hypothesis is correct, the opportunity is large enough for investors to buy in later. Results from Lilly’s trial next year, and Roche’s later this year, will flesh out the picture of any future market for these drugs and give investors safer opportunities to make their bets.

Barrons : Junk-Bond Yields Top 8%. It Could Be a Good Time to Buy.

Junk-Bond Yields Top 8%. It Could Be a Good Time to Buy.

High-yield bonds are finally living up to their name after the broad selloff in fixed-income markets this year.

Better known as junk, the $1.5 trillion sector looks appealing, as yields have risen to an average of 8.8% from 4.4% at the start of 2022, according to the ICE BofA US High Yield Index. Junk debt offers an alternative—or supplement—to stocks.

Junk bonds aren’t without risk. The ICE index had a negative total return of 12.6% in 2022 through this past Thursday, though that’s better than the 20% decline (including dividends) of the S&P 500SPX –1.72% index. And many investors understandably balk at buying debt of leveraged companies heading into a potential recession.

“Avoid junk bonds and junk equities,” warned Ariel Investments’ portfolio manager Rupal J. Bhansali, a Barron’s Roundtable member, at MarketWatch’s Best Ideas in Money conference on Thursday. “Risk assets” like junk, she said, aren’t the place to be now.

A counterargument is that junk-bond math looks pretty good at current levels. The yield gap between junk debt and risk-free Treasuries has widened to five percentage points from three points at the start of 2022, based on the ICE index. Now, it would take a default rate of 8%, coupled with a bond recovery rate of just 40%, to effectively match the yield on Treasuries (8% times a loss rate of 60% is nearly 5%, the current spread of junk to Treasuries). The market overall appears to be in good shape, with the default rate running below 1%, although likely to head higher.

One underappreciated plus is that more than half of the market now consists of double-B-rated issues, the highest junk rating, from solid companies such as Charter Communications CHTR –3.68% (ticker CHTR), Alcoa AA –5.36% (AA), and Ford Motor Credit, the auto maker’s finance arm. Just 10% of the market is in the most speculative triple-C category.

“Most companies should be able to withstand a soft recession. Companies took advantage of historically low rates to refinance debt and have padded their balance sheets with liquidity,’ says Dan DeYoung, co-manager of the Columbia High Yield BondCHYZX –0.88% fund (INEAX). “The lower interest burden coupled with pushing out near-term debt maturities have given most high-yield companies increased financial flexibility to navigate an economic slowdown.”

The new-issue market is quiet as speculative companies balk at rates needed to attract investors. A high-profile financing for the leveraged buyout of software maker Citrix Systems (CTXS) was done recently at 10%. Royal Caribbean Group RCL –5.49% (RCL) sold $2 billion of debt on Thursday that included 9.25% bonds due in 2029. Other big junk deals waiting in the wings will finance the buyouts of Nielsen Holdings (NLSN) and Tenneco (TEN). Companies might not like those yields, but investors should.

Investors can play junk bonds through open-end mutual, closed-end, or exchange-traded funds, and individual issues. There is also another $1.5 trillion of so-called leveraged loans, which are privately issued senior obligations sold to institutional investors. That market also has funds and ETFs.

RELATED MARKET DATA
Bonds & Rates

Many investors like the liquidity of junk ETFs, such as iShares $ iBoxx High Yield Corporate (HYG) and SPDR Bloomberg High Yield Bond (JNK), which hold some of the largest issues and yield about 8%. The VanEck Fallen Angel High Yield Bond ETF (ANGL), which buys corporate debt that was once investment grade, is an alternative that holds bonds from issuers like Las Vegas Sands (LVS) and Royal Caribbean. The fund’s performance has bested the two larger junk ETFs in recent years.

There’s a case to be made for active management in the junk market, where astute investors can add value. Closed-end junk funds offer higher yields than open-end funds and ETFs, thanks to leverage, which results in greater price volatility. “We believe there are great opportunities,” says Eric Boughton, co-manager of Matisse Discounted Bond CEF Strategy (MDFIX), which buys discounted closed-end bond funds in many sectors, including junk and municipals.

He says junk yields are attractive and closed-end funds are a cheap way to play the sector because the average fund discount to net asset value is 9%, versus 5% in the past two years.

The BlackRock Corporate High Yield fund (HYT), the largest junk closed-end fund at $1.2 billion, trades around $9 a share, a 9% discount to net asset value. It yields over 10%. Nuveen Credit Strategies Income (JQC), which buys leveraged loans, trades around $5, a 14% discount to NAV, while yielding 9.5%.

Leveraged junk closed-end funds have negative returns in the high teens this year, but if the market rallies, they could rise smartly.

Even individual bonds look attractive. Columbia’s DeYoung is partial to debt of American Airlines Group (AAL) and Uber Technologies (UBER). He favors a $3.5 billion issue from American backed by its AAdvantage program. Those 5.5% bonds due in 2026 now yield 8%. DeYoung says they’re safe, given the value of the mileage program and its importance to American. Uber, the big ride-sharing company, was profitable by one measure in the second quarter, which lifted its stock by over 30%. Its 4.5% bonds due in 2029 yield about 7%.

It’s not easy for retail investors to buy individual junk bonds, because many are issued as private placements under Rule 144A and available only to institutions (retail buyers can purchase some deals).

Barron’s has written about the high yields of “busted” convertible bonds, often issued by formerly popular growth companies, such as Peloton Interactive (PTON), Wayfair (W), and MicroStrategy (MSTR). These trade at steep discounts to their face value and carry yields to maturity of 10% or more. Peloton’s zero-coupon convertible due in 2026 trades for 67 cents on the dollar and yields 12%, while Wayfair’s 0.625% issue due in 2025 fetches 70 cents and yields more than 12%. Bitcoin owner MicroStrategy’s zero-coupon bond due in 2027 trades under 50 cents on the dollar and yields 18%. Most convertibles lack ratings and probably would be junk grade if they had them.

There is plenty to choose from now in the junk market.

>>> Weekend Papers Summary

Weekend Papers Summary

NEW YORK TIMES
-As the Russian military appears increasingly in turmoil, President Vladimir Putin is taking on a deeper role in war planning, U.S. officials said.
Mr. Putin has rejected requests to retreat from a vital city and told commanders that strategic decisions in the field are his to make, creating tensions.
-Putin’s Draft Draws Resistance in Russia’s Far-Flung Regions
Villagers, activists and some officials have asked why President Vladimir Putin’s draft seems to be hitting poor, rural areas harder than big cities.
-Global markets tumble as recession fears return. The S&P 500 fell 1.7%, just above its lowest point for the year in June. It’s on course for its third straight quarter of losses.
-Former President Trump’s legal team pushes to limit aides’ testimony in the January 6 inquiry. Trump’s lawyers are seeking to invoke attorney-client and executive privilege over grand jury testimony after witnesses received subpoenas.
-The New York attorney general’s lawsuit against the Trump family hinges on a law used to take on corporate giants.
-Amid GOP Cash Crunch, Former President Trump, sitting on a huge campaign war chest, is eyeing a raft of television ads to help Republican candidates in the midterm elections, people familiar with the talks say.
-Lorne Michaels discusses the ‘year of reinvention’ coming to ‘Saturday Night Live.’ The SNL creator explains how the show is handling one of its biggest cast turnovers in decades and why he has no plans to retire.
-Ahead of the midterms, Representative Kevin McCarthy, the House minority leader, presented neutral-sounding ideas that he said would guide a Republican majority.
-Tropical Storm Ian is forming and Florida prepares for its effects. Gov. Ron DeSantis of Florida on Friday declared a state of emergency for 24 counties ahead of the storm, which could develop into a major hurricane by next week.

THE FINANCIAL TIMES
-The FTSE All-World index of global stocks fell 2.1 per cent on Friday, bringing its loss over the week to 5 per cent, the worst since June. Wall Street’s benchmark S&P 500 stock index finished the week down 4.6%, while the tech-dominated Nasdaq Composite shed 4.16%. Europe’s Stoxx 600 registered a daily loss of 2.3% on Friday to officially enter “bear market” territory — typically defined as having declined 20 per cent or more from a recent peak. The moves came at the end of a tumultuous week dominated by hawkish central bank updates as policymakers try to stamp out soaring inflation.
-Voting began on Friday in four provinces in southern and eastern Ukraine in hastily convened referendums on whether to join Russia, to the delight of pro-Moscow officials and the disgust of those residents whose allegiance still lies with Ukraine.
-The La Niña weather phenomenon is under way for the third year running, the first time in more than 20 years that a “triple dip” has occurred, putting countries already affected by floods and drought on alert.
The moves came at the end of a tumultuous week dominated by hawkish central bank updates as policymakers try to stamp out soaring inflation.
-Citi’s existing book totals roughly $65B and the bank is preparing to slash that to about $20B in the coming months, one of the people said. There is high demand for the lending from buyout groups in particular, which use money pledged by fund investors as collateral for the short-term bank loans to close deals in advance of receiving cash from their backers.
-Demand for the new iPhone 14 unveiled earlier this month is already robust enough to project that the global “average selling price” — or ASP — will rise to a record $892 in the September quarter and $944 in the December quarter, according to Counterpoint Research, a data provider, which bases its projections on consumer demand, market intelligence, and talks with suppliers.
-In recent decades, policymakers and business leaders who attended gatherings at Davos and had the ears of western leaders were inclined to think otherwise. After the fall of the Berlin Wall in 1989, a near-consensus prevailed among them that peace was the natural condition of the developed world and that globalization was immune from geopolitical risk.
-Hong Kong will ditch its stringent hotel quarantine for incoming travelers that has eroded the city’s status as a financial hub, hammered its economy and sparked an exodus of residents. The policy, which at one point required visitors and residents to quarantine in a hotel for as long as three weeks, had been in place for two and a half years, effectively cutting the city off from the rest of the world as well as from mainland China.

NY POST
-Two US veterans who were released by Russian separatists as part of a prisoner exchange are finally back on American soil after landing in New York City on Friday. Alex Drueke and Andy Huynh both disappeared three months ago in the Kharkiv region in eastern Ukraine while fighting alongside Ukrainian soldiers against invading Russian forces. The pair were released to the US embassy in Saudi Arabia before finally touching down at JFK International Airport around noon.
-Google CEO Sundar Pichai reportedly grew agitated during a “heated” all-hands meeting in which an employee asked why the search engine was “nickel-and-diming” workers by taking away perks and benefits. Pichai, who has ratcheted up the pressure on Googlers to boost productivity in the midst of a sharp economic downturn, held court at a meeting in New York this week during which he was grilled by his employees over cuts to travel and entertainment budgets. One worker summoned the nerve to ask Pichai why Google was “nickel-and-diming employees” when the company reported “record profits and huge cash reserves.”