Asian stocks rose Tuesday amid a jump in some technology firms and as investors assessed China’s efforts to stamp out Covid. An Asian share index rose for a third day -- it’s longest winning streak since mid-March. US and European futures bounced back after a Wall Street drop. China’s tech companies jumped on optimism Beijing may ease up on a yearlong clampdown following a meeting between regulators and corporate giants. Meanwhile, Shanghai reported three days of zero community transmission, a milestone that could lead officials to start unwinding a punishing lockdown. Flareups elsewhere in China showed how hard it is to tackle the omicron strain. A challenging global economic outlook amid elevated food and fuelcosts and tightening monetary settings continues to shape sentiment. Oil has jumped to about $114 a barrel and an index of agricultural prices is at a record high. Treasury yields climbed and the dollar held a retreat. Cryptocurrencies weathered the latest stablecoin turbulence, leaving Bitcoin near $30,000. US data Monday showed New York state manufacturing activity unexpectedly shrank in May for the second time in three months. That followed Chinese figures revealing a collapse in economic activity due to Covid-linked curbs.
The economic reports have fanned concerns of a downturn in the global economy alongside persistent price pressures that are forcing the Federal Reserve and a slew of other central banks to tighten monetary policy. US After Hours UAL +3.2% gets more bullish on Q2 outlook; SSYS +3.7%, TTWO +3.5% higher on earnings; GLBE -27% falls on earnings
Nikkei +0,34% Hang Seng +2,35% CSI +1,15% Shanghai +0,55% Shenzen +0,61%
Eur$ 1,0443 CNH 6,7832 CNY 7,7753 JPY 129,38 GBP 1,2342 CHF 1,0014 RUB 64,1250 TRY 15,6332 WTI$113,69 Gold 1,824,90 BTC 30,270 +1,2% ETH 2,070 +1,6%
S&P +0,50% Nasdaq +0,79% EuroStoxx +1,03% FTSE +0,55% Dax +1,02% SMI +0,52%
Macro :
- UK Plc and Energy Firms Set to Lead Rise in Activism, A&M Says
- Swiss Market Is Outperforming, But Not Like a Convincing Haven
- Bitcoin Edges Past $30,000 as Traders Assess Stablecoin Fallout
Keep an eye on :
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- ADJ GY : Adler Looking at Ways to Prop Up Consus Unit as Impairments Loom
- AIR FP : Boeing’s Top Chinese Customer Removes 737 Max From Fleet Plans
- ARAMI FP : Aramis 1H Adjusted Revenue EU872.6M Vs. EU591.8M Y/y
- AGR LN : Assura Delays Full Year 2022 Results Announcement to May 24
- BCP PL : BCP 1Q Net Income EU112.9M Vs. EU57.8M Y/y
- CABK SM : CaixaBank Targets Generating Capital of About EU9B in Plan
- CABK SM : CaixaBank Board Agreed to Approve, Start Buyback of Up to EU1.8b
- CA FP : Germany’s Flink Buys Carrefour-Backed Cajoo; No Terms
- CLN SW : Clariant Governance Pact With Sabic to Expire After June 24 AGM
- DTG GY : Daimler Truck Boosts FY Revenue Forecast, Beats Estimates
- EPIC IPO : Epic Suisse Sets Price Range For Swiss IPO At CHF67-CHF77/Shr
- EVT GY : Evotec, Sernova Partner for Diabetes Cell Replacement Therapy
- FCT IM : Fincantieri Names Pierroberto Folgiero as CEO
- GYC GY : Grand City Properties 1Q FFO I EU48.4M Vs. EU46.8M Y/y
- HBH GY : Hornbach Sees FY Adj. Ebit `Slightly' Below Previous Year Level
- OERL SW : Oerlikon Targets About CHF3.5b Annual Sales by 2026
- PIRC IM : Camfin, Chemchina Renew Pirelli Shareholder Pact
- RNO FP : Renault CEO Doesn’t Rule Out Nissan Merger: TV Tokyo (May 16)
- S93 GY : EU Plan Could See Solar Panels on All New Buildings: FT
- SBBB SS : SBB CEO Says Rent Levels in Sweden Can’t Go Lower
- SOON SW : Sonova FY Sales Beats Estimates
- STORB SS : Storskogen 1Q Sales Beats Estimates
- TSLA US : Tesla Shanghai Output Reaches 45% of Capacity as Shutdown Eases
- TWTR US : Musk May Sell SpaceX Shares to Fund Twitter Deal: New York Post
- UCG IM : London’s Parvus Raises UniCredit Stake to 5%
- UN01 GY : Uniper Faces Credit Cutoff After Rating Downgrade Over Russia
- VOD LN : Vodafone Sees 2023 Adjusted Ebitda After Leases EU15B to EU15.5B
>>> Up
* Bechtle Raised to Buy at Baader Helvea; PT 60 euros
* Delivery Hero Raised to Buy at Bryan Garnier; PT 66 euros
* Diploma Raised to Sector Perform at RBC; PT 2,450 pence
* Greenvolt Raised to Buy at JB Capital Markets; PT 8 euros
* Just Eat Takeaway Raised to Buy at Bryan Garnier; PT 55 euros
* Krones Raised to Buy at HSBC; PT 96 euros
* Marimekko Raised to Accumulate at Inderes; PT 14 euros
* Prosus Raised to Overweight at JPMorgan; PT 73.40 euros
* Unipol Raised to Buy at Berenberg; PT 7 euros
>>> Down
* Acciona Cut to Sector Perform at RBC; PT 185 euros
* B&S Group Cut to Hold at ING; PT 7.25 euros
* Delticom Cut to Hold at Bankhaus Metzler; PT 3.30 euros
* UnipolSai Cut to Hold at Berenberg; PT 2.98 euros
>>> Initiation
* BMW Rated New Outperform at Bernstein; PT 100 euros
* flatexDEGIRO Rated New Underperform at Autonomous Research
* Koenig & Bauer Rated New Buy at Stifel; PT 24 euros
* Mercedes Rated New Outperform at Bernstein; PT 85 euros
* Porsche SE Reinstated Underperform at Bernstein; PT 60 euros
* Renault Reinstated Market Perform at Bernstein; PT 25 euros
* Vicore Pharma Rated New Buy at Nordea; PT 84 kronor
* Volvo Cars Rated New Outperform at Bernstein; PT 90 kronor
* VW Reinstated Market Perform at Bernstein; PT 208 euros
>>> Call
* Bechtle Up to Buy at Baader With Multiple Contraction Overdone
* Diploma Upgraded at RBC With Valuation Now Less Stretched
* Goldman Downgrades Global Stocks’ Short-Term Outlook to Neutral
* Prosus and Naspers Both Raised at JPMorgan After Tencent Upgrade
* Unipol Upgraded to Buy, UnipolSai Cut to Hold at Berenberg
"It Was A Mistake" - Bernanke Says Fed's Fear Of 'Shocking' The Market Delayed Tightening Move
With inflation running rampant, unemployment falling, and wages soaring, the Jerome Powell-led Federal Reserve waited too long to reverse its ultra-low interest rate policies and a massive bond-buying program. This delay has now been called a "mistake" by former Fed Chairman Ben Bernanke.
Bernanke spoke with CNBC's Andrew Ross Sorkin in an interview during Monday's "Squawk Box" show. He told Sorkin, "The question is why did they delay that. ... Why did they delay their response? I think in retrospect, yes, it was a mistake."
Inflation has become one of the most severe threats to the economy. Bernanke said, "And I think they [Fed] agree it was a mistake." He explains why the Fed missed the window of opportunity to tighten:
"One of the reasons was that they wanted not to shock the market."Jay Powell was on my board during the Taper Tantrum in 2013, which was a very unpleasant experience. He wanted to avoid that kind of thing by giving people as much warning as possible. And so that gradualism was one of several reasons why the Fed didn't respond more quickly to the inflationary pressure in the middle of 2021," he said.
Powell, the defender of financial markets, got it wrong last year when inflation began to run higher than the Fed's 2% target, though Fed members widely said inflation would be "transitory." What's disturbing is inflation was not transitory, and the monetary wonks operating the printing presses clearly didn't understand. Their inability to tighten last summer has caused the Fed to be way behind the curve, hence today's oversized rate hikes.
So how behind the curve is the Powell-led Fed? The Taylor Rule suggests Fed Funds should be over 11%, not around 1%. The Taylor rule is a formula that can predict or guide how central banks should alter interest rates due to changes in the economy.
Right now, Taylor's rule recommends that the Federal Reserve should continue to raise interest rates.
"There's a lot of support for the fact that the Fed is tightening now, even though obviously we see the effects in markets," Bernanke said. "You know, we'll see the effects in house prices, etc."
Meanwhile, the central bank is attempting to achieve a proverbial "soft landing," though there's an increasing risk of a recession in the not-too-distant future.
Powell and gang missed the window of opportunity to tighten policy rates and is now considered, well, in one former central banker's eyes, a "mistake." And with policy errors, hard landings are usually seen.
Watch the full interview here.
‘Self Portrait,’ by Andy Warhol, is part of the Macklowe sale at Sotheby’s.PHOTO: ALEXI ROSENFELD/GETTY IMAGES
A group of 65 artworks totaling $922 million and amassed over the past half-century by New York real-estate developer Harry Macklowe and his ex-wife, Linda Macklowe, can now claim bragging rights as the priciest collection ever sold in auction history.
Colorful, wall-power paintings by midcentury masters like Mark Rothko, Andy Warhol and Cy Twombly triumphed across a pair of evening sales at Sotheby’s in New York: an initial, $676 million sale held in November, and Monday’s $246 million follow-up. This second and final batch was led by a moody, maroon-colored $48 million untitled Rothko from 1960.
Taken together, the Macklowe trove managed to topple the previous, $835 million record set four years ago by the 1,500-piece estate of banking scion David Rockefeller and his wife, Peggy Rockefeller. Whereas the Rockefeller estate was packed with more porcelain dishes than Pablo Picasso paintings and took Christie’s 10 sale days to unload, the Macklowe holdings mainly comprised 20th-century masterpieces prized by today’s global billionaires.
Mark Rothko’s ‘Untitled’ (1960)PHOTO: SOTHEBY'S
“What else are you going to invest in right now?” said Sotheby’s Chief Executive Charles Stewart after Monday’s sale. “Art doesn’t evaporate, and the people who came out tonight knew they were getting quality works.”
The Sotheby’s sale is the latest sign that the art market remains on fire even as the broader economy faces volatility. Sotheby’s Macklowe sale follows Christie’s $1.4 billion sale last week that saw a Warhol sell for a record-setting $195 million, the most ever paid at auction for a work by a U.S. artist. New York dealer Larry Gagosian won the Warhol, but it couldn't be learned whether he was bidding on behalf of someone else.
“We’re in a moment now where people want art created in the last few years, but that makes classic contemporary look like a great opportunity,” said private dealer Anthony Grant following Monday’s sale at Sotheby’s. “I bid on three things and only won one.” Mr. Grant lost out on paintings by Mr. Twombly and Sigmar Polke but won an untitled, $1.4 million Donald Judd.
Gerhard Richter’s ‘Seestück (Seascape)’ (1975)PHOTO: SOTHEBY'S
Heading into Monday’s sale, Sotheby’s had to face down some challenges. Last fall, news of the Macklowe consignment featuring works by Alberto Giacometti and Jackson Pollock was initially met with giddy enthusiasm. Six months later, the house had to make sure collectors remembered to double back for this second batch, mostly pieces with smaller asking prices. No works sold Monday topped the $82.4 million paid last fall for the Macklowes’ Rothko “No. 7” or their $78.4 million Giacometti “Nose.” Still, a telephone bidder paid Sotheby’s $48 million for the maroon-and-lavender Rothko abstract from 1960, over its $35 million low estimate.
Jeff Koons’s ‘Popples’ (1988)PHOTO: SOTHEBY'S
Gerhard Richter’s 1975 “Seascape,” which shows a cloudy sky over mauve-colored waves splashed across a canvas nearly 10 feet wide, sold for $30.2 million. It was expected to sell for at least $25 million. Warhol’s camouflage 1986 “Self-Portrait,” created a few months before he died, sold for $18.7 million. The 80-inch square work was expected to sell for at least $15 million.
Two bidders vied for Cy Twombly’s 1968 “Synopsis of a Battle,” a piece from the artist’s “Blackboard” series, whose notations seek to map out historic battles by Alexander the Great and others. Of the five battle-scene Blackboards Twombly created, two belong to the National Gallery of Art in Washington and the Virginia Museum of Fine Art. The Macklowes bought theirs in 1979, in part because it was the only battle-themed Twombly to come to auction in more than 30 years, Sotheby’s said. It sold for $15.3 million on Monday.
Andy Warhol’s ‘Blue Airmail Stamps’ (1962)PHOTO: SOTHEBY'S
Mr. Macklowe was spotted in Sotheby’s skybox watching the bidding in the crowded salesroom, dotted with dealers and collectors like Carson Guo. The sale aims to serve as a court-ordered finale to the former couple’s divorce proceedings.
Mr. Macklowe was selling magazine ads when he married Linda in 1959, according to court papers. Eventually they started buying art, adding higher-price pieces as his career in real estate and her work as an independent curator and philanthropist took off. Now in their 80s, he remains a high-profile developer of skyscrapers such as 432 Park Ave. and she is a trustee of the Metropolitan Museum of Art.
Since they began divorce proceedings in 2016, the sifting of their assets has become the subject of regular tabloid fodder—particularly after Mr. Macklowe hung 42-foot high photographs of him and his second wife, Patricia, whom he married in 2019, from the side of 432 Park Ave. Auction proceeds will now be evenly split, according to a court filing.
Linda Macklowe declined to comment.
After the sale, Mr. Macklowe said he “found it so satisfying” to see people chasing after works he lived with for decades. “I build skyscrapers, but I’m so proud to have built this nearly $1 billion collection, too.”
Sotheby’s spring series will continue Tuesday with a modern art sale estimated to top $340 million, and Phillips will follow Wednesday with its own estimated $170 million evening sale.
Cy Twombly’s ‘Synopsis of a Battle’ (1968)PHOTO: SOTHEBY'S
Cryptocurrency TerraUSD Falls to 11 Cents, Creator Announces Rescue Plan
Crux of the plan involved what is called a ‘fork’ in software terms; basically taking the existing code and starting over with an updated version
The price of the stablecoin TerraUSD was down sharply on Monday as the cryptocurrency’s creator announced a plan to attempt to rescue the project.
The price of TerraUSD, created to maintain a value equal to a dollar, was down 36% at 11 cents, according to CoinMarketCap. Trading volume over the past 24 hours was less than $400 million, down from the more than $5 billion in volume it saw last week.
TerraUSD’s market value was down to $1.3 billion from nearly $19 billion earlier this year.
TerraUSD had a catastrophic meltdown last week amid the wider market selloff, falling well below its $1 value. The collapse put pressure on the price of bitcoin and other cryptocurrencies, and erased the value of TerraUSD’s sister token, called Luna. As a so-called algorithmic stablecoin, TerraUSD used Luna to keep its value at $1.
On Monday, Luna was trading down 15% at $0.0002, according to CoinMarketCap. Its total market value was about $1.4 billion on Monday, according to CoinMarketCap. Earlier this year, Luna crested at $41 billion.
On Monday afternoon, Do Kwon, the token’s founder, outlined what he was calling a revival plan for Terra. The crux of the plan involved what is called a “fork” in software terms—basically taking the existing code and starting over with an updated version.
The new version would do away with the algorithmic stablecoin, and would distribute 1 billion tokens of a new version of Luna to existing Luna and TerraUSD holders and developers.
Also on Monday, the nonprofit Luna Foundation Guard, which controlled the reserve fund that backed the stablecoin, outlined the remaining reserves left after TerraUSD’s collapse. Among its assets, the group has 313 bitcoins, worth about $9.3 million at current prices.
On May 7, it had 80,400 bitcoins, worth roughly $3.5 billion. The foundation sold most of the bitcoins to defend the TerraUSD peg, the group said.
Overall, the group said it still had about $106 million in assets that it will use to compensate remaining holders of TerraUSD, beginning with the smallest holders. It didn’t provide specifics on how this compensation might work.
The moves didn’t have much of an effect in the wider crypto markets. None of the top 20 cryptocurrencies were rising on Monday afternoon, according to CoinDesk. Bitcoin fell 1.8% at $29,737, and ether fell 3.1% to $2,021.
The downdraft in crypto markets has attracted scrutiny from regulators in the Biden administration, who have been looking to develop policies to govern the asset class.
“The fact that we have this across-market meltdown because of a single stablecoin…should be a lesson for what potentially could happen,” Rostin Behnam, head of the Commodity Futures Trading Commission, said in a CNBC interview Monday. He cited the potential for a “knock-on effect to the traditional assets and traditional markets.”
Securities and Exchange Commission Chair Gary Gensler warned investors Monday that crypto markets are “a highly speculative asset class” that lack the disclosures that issuers of equities or debt provide.
Warren Buffett Spends Big as Stock Market Sells Off
Berkshire Hathaway loads up on energy stocks as inflation soars
The stock market’s selloff has been bad news for most investors.
Not for Warren Buffett and his team.
Mr. Buffett’s Berkshire Hathaway Inc. BRK.B -0.34% has used the slump as an opportunity to increase spending on stocks, deploying tens of billions of dollars the past couple of months after ending 2021 with a near-record cash pile.
The Omaha-based company bought 901,768 shares of Occidental Petroleum Corp. OXY 5.68% last week, according to a regulatory filing. The move makes Occidental, in which Berkshire began buying shares in late February, one of its 10 biggest holdings.
In the past few months, Berkshire has also boosted its stake in Chevron Corp. CVX 3.06% , placed a merger-arbitrage bet on Activision Blizzard Inc. ATVI 0.33% , bought shares of HP Inc. HPQ 1.98% , Citigroup Inc. and Ally Financial Inc. ALLY -2.15% , and continued adding to its position in Apple Inc., which remained its biggest stockholding.
Investors got a look at what Berkshire has been buying—as well as what it has been selling—when it filed what is known as Form 13F with the Securities and Exchange Commission on Monday. The SEC requires all institutional investors that manage more than $100 million to file the form within 45 days of the end of each quarter. Because institutions must disclose their equity holdings on the form, as well as the size and market value of each position, investors often use 13Fs to gauge how large money managers are playing the stock market.
One takeaway from Berkshire’s filing was this: The market’s tumult has allowed the company to go on a spending spree.
Mr. Buffett, a longtime adherent of value investing, has long advised that investors “be greedy when others are fearful.” That philosophy was likely difficult to practice for much of the past two years, during which investors’ mood largely seemed anything but fearful. Now that the market is slumping, Berkshire is in a prime position to add to its mammoth stock portfolio, investors say.
“Cash is dry powder, and he has a lot of it,” said Rupal Bhansali, chief investment officer for global equities at Ariel Investments, of Mr. Buffett. Ms. Bhansali manages Ariel’s global mutual fund, which owns Berkshire shares.
Ms. Bhansali, among others, also believes that Berkshire’s investments in Chevron and Occidental might reflect a bet that commodities prices will stay elevated for some time.
Energy stocks have been by far the best-performing group in the S&P 500 this year, benefiting from a surge in commodities prices that began after Russia’s invasion of Ukraine raised concerns about disruptions to oil and gas supply lines. Chevron shares are up 47% this year, while Occidental shares have gone up 134%. In comparison, the S&P 500 has fallen 16%.
“They’re clearly owning companies that are likely to be an inflation hedge,” Ms. Bhansali said.
Energy stocks also offer two characteristics that Mr. Buffett has traditionally gravitated toward: low valuations, as well as shareholder returns in the form of buybacks and dividends, said Jim Shanahan, senior equity research analyst at Edward Jones.
Dividend-paying stocks have outperformed the S&P 500 this year, in part as investors whipsawed by market volatility have sought out stocks that can offer steady cash returns.
“It fits the profile,” Mr. Shanahan said of Berkshire’s Chevron and Occidental share purchases.
Berkshire ramped up its purchases of bank stocks, which also tend to trade at relatively low valuations and offer dividends. The company bought 55 million shares of Citigroup in the first quarter, a stake valued at about $3 billion. The move marks a reversal of sorts for Berkshire: it unloaded much of its bank stocks in 2020, selling Goldman Sachs Group Inc. , JPMorgan Chase & Co. and much of its Wells Fargo stake, only to miss out on the financial sector’s remarkable rally in the second half of the year and 2021.
“They faced a lot of criticism for not having done more in March and April 2020,” Mr. Shanahan said of Berkshire. “But they defended it by saying back then they didn’t know how bad it was going to get. It was a different environment.”
Mr. Shanahan said that while the pandemic marked a period of missed opportunities for Berkshire, he is pleased to see the company ramping up its investment activity again.
With stock volatility remaining elevated, many investors and analysts expect Mr. Buffett, as well as Berkshire portfolio managers Ted Weschler and Todd Combs, to keep putting cash to work in the market over the coming months.
Berkshire ended last year with a mountain of cash on its hands—not necessarily out of a desire to build up its war chest, but because it had been impossible to find companies that seemed worth investing in for the long term, Mr. Buffett said to shareholders in his annual letter sent out in February. It had $106.3 billion in cash as of March 31, down from $146.7 billion at the end of 2021.
This year has changed that. With tightening monetary policy, slowing economic growth and sustained supply-chain disruptions putting markets on edge, Mr. Buffett is in his element, said David Kass, a finance professor at the University of Maryland’s Robert H. Smith School of Business.
“This is what I’d consider to be Warren Buffett’s sweet spot,” Mr. Kass said. “The almost wholesale selling in the market has provided Berkshire an opportunity to buy securities at bargain prices.”
Tiger Global slashes bets on tech groups after stock market sell-off
Value of hedge fund’s public shareholdings fell by almost $20bn during first quarter
Tiger Global, the hedge fund known for making big bets on technology companies, slashed its shareholdings and dumped stakes in companies such as Netflix and Rivian as it suffered heavy losses during this year’s stock market rout.
The total value of Tiger Global’s public stock positions fell from $46bn at the end of last year to just over $26bn at the end of the first quarter, according to regulatory filings released on Monday. The decline in value reflected lower stock market valuations as well as share sales.
In a significant retreat for the New York-based firm, Tiger Global sold its entire stake in several well-known consumer tech companies including dating app Bumble, vacation rental company Airbnb and Didi, the Chinese ride-hailing group.
It also significantly reduced its exposure to trading app Robinhood, selling almost 80 per cent of its stake, and Peloton, the beleaguered connected fitness company. Tiger Global declined to comment.
Tech stocks have been pummelled this year as investors grapple with higher inflation and interest rates and grow wary of companies that prospered during the coronavirus pandemic but have fallen out of favour as economies have reopened.
The dramatic pullback by Tiger Global is the latest evidence of a bruising start to the year for the hedge fund and its founder Chase Coleman, who built a reputation as one of the world’s most prominent growth investors after setting the firm up in 2001.
The disclosures on Monday were made in routine quarterly filings known as 13-Fs. They came after the Financial Times reported this month that Tiger Global had been hit by losses of about $17bn during this year’s tech sell-off, one of the biggest dollar declines for a hedge fund in history.
Tiger Global told investors this month that its stockpicking funds had suffered large losses, leaving them well below previous peaks. Tiger Global’s main hedge fund fell 15.2 per cent in April, bringing this year’s losses to 43.7 per cent. Another fund that only makes “long” stock investments fell 51.7 per cent between the start of the year and the end of April.
Tiger Global called the results “very disappointing” in a letter to investors, adding that “markets have not been co-operative given the macroeconomic backdrop”.
The hedge fund has gained notoriety for an aggressive style of investing in private start-ups that startled some rival venture capitalists. It told investors in March it had raised $12.7bn for its newest venture capital fund, the largest of its kind.
Unlike some of Tiger Global’s previous funds, the new vehicle has focused on making investments in relatively young start-ups. Tiger Global told investors more than half of the fund’s investments were in Series A or Series B deals, typically the first or second big financings for private tech companies.
Some of Tiger Global’s first-quarter share sales were of companies it backed as private start-ups. For instance, the firm sold more than 70 per cent of its stake in the cryptocurrency exchange Coinbase, which totalled $724mn at the end of last year.
It also sold 95 per cent of its shares in the software company UiPath, a position that had been valued at $354mn.
Third Point, the hedge fund led by Daniel Loeb, also shed some of its largest tech investments.
The New York-based fund sold its entire stake in Google’s parent company Alphabet and more than 90 per cent of its position in Amazon during the first quarter, according to filings. It also sold a more than $600mn stake in the fintech company Upstart, which it had backed as a private start-up.
In a letter to investors this month, Loeb said the fund had “adopted a significantly more defensive posture” beginning in the first quarter because of “concerns about valuations in the current interest rate environment, geopolitical uncertainty, and emerging weakness in important global economies”.
Warren Buffett buys $3bn Citigroup stake in value-hunting stock splurge
Berkshire Hathaway exits Wells Fargo and buys up oil companies, quarterly disclosure shows
Warren Buffett’s Berkshire Hathaway has made a big bet on Citigroup, as the legendary investor funnels some of the conglomerate’s mammoth cash hoard into stocks during this year’s market decline.
Berkshire bought $3bn worth of shares in the Wall Street bank in the first quarter, giving the group a stake of about 2.8 per cent, according to filings with regulators. The investment came as Berkshire sold the remainder of its position in Wells Fargo, a rival bank that was a staple in Buffett’s portfolio for more than three decades.
Buffett, Berkshire’s chief executive, watched from the sidelines as markets plunged and then rallied at the height of the pandemic. But at the start of this year, he ploughed $51.1bn into the market as global stocks sagged in the face of a hawkish pivot from the Federal Reserve, supply chain disruptions, strong inflation and the war in Ukraine.
Markets have continued to decline, knocking the valuations of large technology companies, banks and consumer-facing businesses.
Berkshire ended 2021 sitting on a near-record $146.7bn cash pile — ammunition to make purchases even as other portfolio managers disclosed sales to keep up with outflows from their investors.
Citigroup has slid more than 21 per cent this year, underperforming the average financial sector stock in the S&P 500 index, which is down 16 per cent for the year.
The lender has lagged behind its Wall Street rivals in critical profitability metrics for more than a decade and is the only big US bank that trades below book value at 52 cents a dollar, according to FactSet. Citi also warned of losses of up to $3bn tied to Russia when it announced financial results in April, contributing to a near halving of its profits for the quarter.
Jane Fraser, chief executive, has promised to boost returns by exiting less-efficient businesses such as international retail banking and focusing on more profitable divisions such as wealth management and transaction services.
Beaten-down stocks were not the only ones to attract Berkshire.
The conglomerate bought $7.7bn worth of shares in oil and gas company Occidental Petroleum and boosted its stake in the oil major Chevron. Occidental’s shares are up almost 120 per cent this year while Chevron has climbed 45 per cent, as energy prices have rallied because of strong demand and the prospect of curtailed supplies from Russia.
Buffett’s company also invested $2.6bn in Paramount Global, the US media group formerly known as ViacomCBS, and bought $400mn worth of shares in lender Ally Financial. Paramount has lost 7 per cent this year, while Ally is down almost a fifth.
Investors pull $7bn from Tether as stablecoin jitters intensify
Tether’s market value falls 9% after stablecoin briefly lost its peg against the dollar
Traders have yanked $7bn from Tether since the world’s biggest stablecoin last week briefly lost its peg against the US dollar, intensifying concerns about the assets that underpin the global cryptocurrency market.
Tether’s market value has fallen by 9 per cent since May 12 to $76bn as tokens have been removed from circulation to meet redemption requests, CryptoCompare data show. The decline comes after Tether last Thursday traded at around 95 cents, well below the $1 level it seeks to maintain following the failure of a smaller rival.
Observers inside and outside of the crypto market have warned that deeper or more lasting volatility in stablecoins, which are designed to maintain a one-to-one peg with the dollar, could drag down the value of thousands of speculative crypto assets that have drawn in speculative buyers around the world.
“There is no guarantee that [stablecoins] can be redeemed at par at any time — just last week the world’s biggest stablecoin temporarily lost its peg to the dollar,” Fabio Panetta, an executive board member at the European Central Bank, said in a speech on Monday.
Panetta added that stablecoin holders can not claim deposit insurance to make good any losses, and operators are not able to access bank standing facilities, leaving the tokens vulnerable to runs. He pointed to last week’s collapse in TerraUSD, once a top-five stablecoin, as an example of this risk.
“It is an illusion to believe that private instruments can act as money when they cannot be converted at par in to public money at all times,” the ECB official added.
Hopping in and out of crypto assets using mainstream currencies like the dollar or sterling can be clunky. Instead, digital asset enthusiasts often use stablecoins, which are native to crypto’s blockchain technology and are designed to keep a one-to-one link with the buck.
As Tether has faced outflows, the stablecoin’s largest rival, Circle’s USD Coin, has drawn in a 5 per cent increase in funds during the same period.
“My understanding is there’s very strong outflow out of some stablecoins, but some inflow into other stablecoins. All of that is suggesting it’s time for stablecoins to really become stable,” said Tobias Adrian, director of the monetary and capital markets department at the IMF.
Big stablecoins are typically lightly regulated, and many are not regulated at all. But central banks are keeping a close eye on developments in the space in case it hits household wealth by depressing crypto prices or sparks other financial stability risks, particularly for tokens like Tether that are backed with financial asset reserves.
In a March 2022 report, the Bank of England said that while stablecoins could play “an increasingly important role in payments . . . public confidence in money and payments could be undermined if a systemic stablecoin used for payments fails to meet its obligations”.
Tether’s operators say the token is backed by a basket of dollar-based assets equal to the size of the tokens outstanding, but it has not released granular details of these reserves. In an interview with the FT last week, Tether executive Paolo Ardoino said revealing details about the group’s reserve management would give away the company’s “secret sauce”.
The company declined to comment on its outflows on Monday. In a blog post on Monday, the group said it “engages in constant risk-management and stress-test scenarios, ensuring it always has at hand, a liquid portfolio of assets to manage redemptions, even in a bank-run scenario”.