FT : Peter Thiel claims ‘finance gerontocracy’ is holding back bitcoin

Peter Thiel claims ‘finance gerontocracy’ is holding back bitcoin
PayPal founder attacks Warren Buffett as he touts crypto’s ‘revolutionary youth movement’ in Miami

Peter Thiel, the libertarian tech investor, challenged some of the most powerful US financial figures on Thursday over their criticism of bitcoin, accusing them of trying to suppress what has become a powerful political movement.

Thiel, who made his name as an outspoken contrarian and early investor in Facebook, dismissed revered investor Warren Buffett as a “sociopathic grandpa from Omaha”. He also cast Jamie Dimon, chief executive of JPMorgan Chase, and Larry Fink, head of BlackRock, as part of a “finance gerontocracy” that was looking to lock cryptocurrencies out of the mainstream.

His outburst came in front of a cheering crowd at the Bitcoin 2022 conference in Miami, where he described the cryptocurrency as part of a “revolutionary youth movement” that was out to overturn traditional finance, threatening the power and wealth of the establishment.

Thiel, one of the founders of PayPal, has long argued that digital currencies could supplant the current financial system. PayPal gave up on its own digital currency ambitions early in its existence to fit into the existing payments world. While it is now worth $130bn, Thiel described the online payments company as a disappointment compared with what it could have become.

By contrast, he claimed bitcoin, worth $830bn, had the potential to rival all the world’s gold, worth $13tn. With inflation rising and confidence in paper currencies declining, he also claimed that the value of bitcoin could match that of all public equities, which are currently worth $115tn, just as gold had matched equities at the end of the 1970s.

In an incendiary attack, he claimed that financial leaders had deliberately sought to suppress bitcoin to protect their own power. “It’s a movement, and it’s a political question whether this movement is going to succeed, or whether the enemies of the movement are going to succeed in stopping us,” he said. Buffett, he added, was “enemy number one”.

Thiel became the tech world’s most famous rightwing figure in 2016 when he backed Donald Trump’s presidential run and spoke at the Republican convention that year.

On Thursday, he lashed out at the fashion for environmental, social and governance investing, depicting it as a core part of the system the financial establishment uses to squash anything that threatens its power.

ESG has become a “hate factory for naming enemies”, he claimed, comparing the focus on social and governance issues to the way the Chinese Communist party operates. He also dismissed environmental investing as “sort of fake”.

In a sideswipe at companies that responded to pressure from politicians or employees over political issues, he added: “Woke companies are quasi-controlled by the government in a way that bitcoin never will be.”

FT : Porsche’s IPO shows old ties are loosening in corporate Germany

Porsche’s IPO shows old ties are loosening in corporate Germany
Until now, excluding Deutsche Bank from a leading role in a blockbuster listing had been unthinkable

Germany doesn’t do glitzy initial public offerings. List on the Frankfurt Stock Exchange and you will get shots of executives posing awkwardly next to the city’s own bronze bull statue, but no fashion models and none of the over the top TV coverage enjoyed by New York market debutants.

Enter Porsche. Germany’s most coveted and profitable auto brand is — after much cajoling — being let loose on the market by its owner Volkswagen, with a partial flotation planned for the end of the year, the war in Ukraine permitting. The IPO will probably eclipse Deutsche Telekom’s record-breaking 1996 offering in terms of cash raised and any other German IPO in terms of media excitement.

Yet when a row of 911s parade through Germany’s financial capital ahead of the bell-ringing ceremony, bankers at the country’s largest lender will be looking on wistfully from their Frankfurt skyscraper. Neither Deutsche Bank, nor its European rivals Barclays and BNP Paribas, are taking a leading role in the IPO.

Instead, in what one industry observer described as a “slap in the face” for European investment banks, VW chose a US-only quartet of Goldman Sachs, Bank of America, JPMorgan and Citi to act as global co-ordinators.

There is of course nothing new about US banks encroaching on European territory. JPMorgan has acted as a bookrunner on 223 European IPOs with a combined deal value of more than $45bn since the 2008 financial crisis, according to data from Dealogic, while Deutsche Bank had 131 deals worth $28bn in its home region during the same period. But until now, excluding Deutsche Bank from a leading role in a blockbuster IPO had been unthinkable under corporate Germany’s omertà-like code of loyalty.

VW insists that the Americans simply did better in a meritocratic selection process, which involved bank bosses such as Deutsche Bank’s Christian Sewing recording video paeans to Porsche in an attempt to win the work.

Not all US pitches were successful either. Morgan Stanley, which refused to extend further credit to VW in the wake of the diesel emissions scandal, was among the banks that failed to win a top spot.

Plus, Deutsche Bank’s recent record in the auto sector is hardly stellar, having presided over the flotation of VW truck unit Traton in 2019, which languishes well below its listing price, and the IPO of Aston Martin, which remains a masterclass in value destruction.

Though VW’s complex ownership structure forces it to list Porsche in Frankfurt rather than the US, it has also been doing its best to convince investors that it is first and foremost a global — rather than a German — company and that it ought to attract US-style sticker prices as a result. One VW manager recently lamented that Rivian, which had not sold a single electric vehicle when it achieved a $66bn valuation last year, was deemed to be worth as much as two-thirds of VW, which sold 450,000 electric vehicles in 2021.

Still, the exclusion of Deutsche Bank, which has a former VW executive on its supervisory board, shows old ties count for less than they used to as European businesses race to tap the biggest capital market in the world.

“The US banks are just not standing still, while the Europeans are slow to move,” says Eriola Shehu Beetz, a partner at BCG who advises the industry. The lack of auxiliary services such as equities trading, which Deutsche Bank axed, had made European banks less attractive, she added. They also struggle to compete with their richer US rivals for the best staff.

Porsche has long said it would not build a factory in China, arguing that its customers were happy to pay for the “Made in Germany” tag. The same cannot be said for the country’s biggest investment bank.

FT : European credit funds hit by outflows of almost €14bn in first quarter

European credit funds hit by outflows of almost €14bn in first quarter
Surging inflation stoked by the war in Ukraine has hurt the region’s corporate bond

Investors withdrew close to €14bn from European corporate debt funds in the first three months of the year, the worst quarter since the start of the pandemic, as the war in Ukraine fired up already rapid inflation and stirred market volatility. 

So-called investment grade debt — at the safer end of the spectrum — lost 5.4 per cent for investors at the start of 2022; again, the worst since the darkest days of the Covid markets shock, while high-yield bonds lost 4.3 per cent. By contrast, US corporate debt markets are relatively serene.

The gap shows investors are braced for sanctions on Russia, particularly in energy, to hurt corporate Europe, with the added chance that a more restrictive stance from the region’s central bank could exacerbate recession risks.

“If there’s a place we don’t want to be right now, it’s [eurozone] credit,” said Florian Ielpo, multi-asset portfolio manager at Lombard Odier Investment Managers. Higher costs for companies and the possibility of rising interest rates are a troubling combination for the asset class, he said.

Russian president Vladimir Putin’s invasion of Ukraine has raised prices for food and fuel, sending annual consumer price inflation in the eurozone as high as 7.5 per cent. Economic growth forecasts have dropped, creating a dilemma for the European Central Bank, which is under pressure to pull back its ultra-loose monetary policy to dampen prices.


US corporate debt markets — which are less exposed than those in Europe to the war in Ukraine — have held up better, with the spread between the yield on high-yield bonds and US Treasuries well below any signal of distress. 

But after a bumper 2021, “Europe has underperformed”, said Mike Scott, lead portfolio manager at Man GLG. “Cyclicals, industry, as well as single B credit and below . . . these are the areas of the market that have seen the greatest amount of pressure.”

In addition, market volatility has more or less stopped the flow of new risky corporate bonds in Europe. Markets had effectively closed to speculative issuers for almost five weeks because of the geopolitical turmoil.

Yet despite the outflows from funds and the slowdown in issuance — debt issuance by companies excluding banks stood at around half its 2021 level between January and mid-March this year — analysts say European companies are relatively well-positioned to cope with rising borrowing costs. 

Companies spent much of the pandemic loading up on cheap debt and locking in longer-term repayment schedules, meaning rising interest rates are unlikely to be as damaging today as they have been in the past. “Near term speculative [refinancing] risk is limited,” said S&P Global, which notes that around 90 per cent of debt maturing through 2023 is investment-grade.

European high-yield default rates ticked up in March to end a run of 10 consecutive monthly declines. JPMorgan, for one, appears unfazed. Although investors are “concerned about macro risks to credit arising from monetary policy and geopolitics, they are also struggling to identify potential default candidates,” the bank said in a note.

Some higher-risk companies are slowly coming back to the market. German drug and agrochemical conglomerate Bayer late last month raised €1.3bn, with Italian bank Intesa Sanpaolo issuing €1bn of debt and Finnish nuclear power company Teollisuuden Voima raising €600mn.

The war in Europe and its effects on inflation and central bank policy have been largely priced in by investors, said Man GLG’s Scott. “I believe there is a window of opportunity for deals to start coming to the market,” he added. “But is the market ready? Unlikely.”

>>> US After Hours Summary: WDFC +10.6% up big on earnings; BIIB -1.7% as Medica

After Hours Summary: WDFC +10.6% up big on earnings; BIIB -1.7% as Medicare releases national policy on aducanumab

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: WDFC +10.6%, NRIX +4.8% (also provides corporate update), PSFE +4.2% (reaffirms guidance for Q1 and FY22; also names new CEO), PSMT +2.3%, QDEL +0.3%

Companies trading higher in after hours in reaction to news: WOW +3.6% (co is exploring options including a sale, according to Bloomberg), GATO +2.9% (names new CEO; also announces record quarterly production), CRWD +2.8% (secures Provisional Authorization to Operate at Impact Level 4), BTAI +2.6% (enters into commercial supply agreement with Arx), DOMA +0.5% (CFO to depart), IIPR +0.1% (announces quarterly operating activity)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: None

Companies trading lower in after hours in reaction to news: HARP -11.6% (CMO departs), CWT -2.3% (to acquire Stroh's Water Company), CPT -1.8% (stock offering), BIIB -1.7% (Medicare releases national policy that limits coverage for aducanumab), NDAQ -0.5% (reports March 2022 metrics), LMT -0.1% (awarded $260 mln Navy contract)

>>> US Close Dow +0.25% S&P +0.43% Nasdaq +0.06% Russell -0.35% VIX 21.55

Closing Stock Market Summary

The S&P 500 increased 0.4% on Thursday, overcoming a 0.7% intraday decline on no specific news catalysts. The Nasdaq Composite (+0.1%) and Dow Jones Industrial Average (+0.3%) also recouped intraday losses while the Russell 2000 (-0.4%) still closed lower despite a recovery effort. 

Two early headwinds for the market included technical resistance at the S&P 500's 200-day moving average (4492) and upwards pressure in long-term interest rates. The 10-yr yield settled higher by five basis points to 2.66% after trading at 2.56% overnight.

Investors, also cognizant of a hawkish-minded Fed, continued to lean defensively as the market drifted lower throughout the morning. Equities, however, turned around in the afternoon without a news catalyst, perhaps amid a contrarian mindset as sentiment had gotten too bearish. 

The S&P 500 reclaimed its 200-day moving average on a closing basis with the help of seven of its 11 sectors. The health care (+1.9%), energy (+1.4%), and consumer staples (+1.2%) sectors led the advance with gains over 1.0%. 

Conversely, the real estate (-0.9%), communication services (-0.7%), utilities (-0.3%), and financials (-0.1%) sectors closed lower. The CBOE Volatility Index (21.55, -0.55, -2.5%) did, too, as hedging interest waned amid the rebound-minded action. 

In corporate news, shares of Costco (COST 608.05, +23.26, +4.0%) hit an all-time high after the company reported adjusted March comparable sales growth of 12.2% while HP Inc. (HPQ 40.06, +5.15, +14.8%) surged 15% after Warren Buffett's Berkshire Hathaway (BRK.B 346.51, +1.80, +0.5%) disclosed a stake in the company. 

Back in the Treasury market, the 2s10s spread increased to 19 basis points from 12 basis points yesterday. The 2-yr yield decreased two basis points to 2.47% while the 10-yr yield, as noted above, settled at 2.66%. The U.S. Dollar Index increased 0.2% to 99.79. WTI crude futures fell 0.3%, or $0.29, to $96.30/bbl. 

Reviewing Thursday's economic data:

  • Initial claims for the week ending April 2 dropped by 5,000 to 166,000 ( consensus 200,000). Continuing claims for the week ending March 26 increased by 17,000 to 1.523 million.
    • The key takeaway from the report is that it was influenced by revisions to seasonal adjustment factors. Still, the low level of initial claims following the revisions remains indicative of a tight labor market.
  • Consumer credit increased by $41.8 billion in February ( consensus $15.5 billion). The prior month saw an upward revision to $8.9 bln from $6.8 bln.
    • In February, consumer credit increased at a seasonally adjusted annual rate of 11.3%. Revolving credit increased at an annual rate of 20.7%, while nonrevolving credit increased at an annual rate of 8.4%.

Looking ahead, investors will receive the Wholesale Inventories report for February on Friday.

  • Dow Jones Industrial Average -4.8% YTD
  • S&P 500 -5.6% YTD
  • Russell 2000 -10.5% YTD
  • Nasdaq Composite -11.2% YTD

FT : UK’s new energy security strategy branded ‘missed opportunity’

UK’s new energy security strategy branded ‘missed opportunity’
Document backs nuclear and offshore wind over cheaper land-based turbines or home improvements

Industry groups and academics have branded Boris Johnson’s long-awaited energy security strategy a “missed opportunity” that would not reduce the UK’s reliance on expensive imports in the short term and fail to alleviate the financial pressure on households from soaring fuel bills.

The prime minister put offshore wind and nuclear power at the centre of the policy that aims to produce 95 per cent of electricity from low-carbon sources by 2030 and reduce the country’s vulnerability to highly volatile global commodity markets.

Johnson said that by making nuclear power one of the cornerstones of the strategy it would allow Britain, which gave the world the first commercial atomic plant, to regain its “pre-eminence” in the technology.

The strategy was drawn up in response to the invasion of Ukraine by Russia, one of the world’s largest fossil fuel exporters. The decision by Vladimir Putin, Russia’s president, to go to war added further volatility to already high global commodity prices and prompted countries across Europe to revisit their energy strategies.

But the prime minister’s decision to back nuclear and offshore wind, which both have long lead times, over cheaper technologies, such as land-based turbines that are quicker to install, was widely criticised.


Energy groups and specialists were also dismayed at a lack of fresh funding to improve the energy efficiency of the UK’s housing stock, which ranks among the worst in Europe. Measures such as improved insulation were among the quickest ways of tackling the current energy crisis, they said.

Simon Virley, head of energy and natural resources at advisory firm KPMG, called the plan a “missed opportunity”. He added: “The best way to reduce energy bills permanently, cut emissions and reduce our dependence on imported gas is a step change in energy efficiency.”

He said that other European countries, like Holland, France and Germany, were “doing this as a matter of urgency as part of their response to the Russia-Ukraine crisis. Yet the UK strategy is almost silent on measures to improve energy efficiency”.

Danny Newport, head of net zero at the non-profit Tony Blair Institute, said the strategy felt “perilously insecure”. He said by “spurning onshore wind”, the government had prioritised “nimbyism” although he acknowledged there were never going to be any quick fixes to the challenge of increasing domestic energy supplies.

Michael Lewis, UK chief executive of Eon, Britain’s second-biggest energy company, said there was “little” in the strategy that would “deliver a solution this decade, let alone this year”.

Environment groups also criticised the government’s plan to hold the first UK North Sea licensing round since 2020 later this year. But Johnson defended plans to source more fossils fuels domestically, pointing out it fitted in with the UK’s net zero target. “In meeting net zero by 2050 we may still use a quarter of the gas that we use now,” he said.

The strategy sets out to reverse the decline in the UK’s nuclear generation capacity by setting a goal of building 24 gigawatts of new atomic power by 2050 — the equivalent of eight large atomic energy plants.

Britain has a poor recent record on delivering such projects, which can take over a decade to build. So far one new nuclear plant — the 3.2GW Hinkley Point C in Somerset — is under construction, even though the Labour government in 2006 set out plans for a new generation of reactors.


Offshore wind capacity is set to increase fivefold to 50GW by 2030, up from a previous 40GW goal by the end of the decade. This target was accompanied by a commitment to cut the time that offshore wind projects can take to start generating from 13 years “down by over half” by fast-tracking processes such as planning consent.

Business secretary Kwasi Kwarteng had wanted to include a target to double onshore wind capacity to 30GW by 2030 but government officials admitted that had not survived “political testing” to make it to the final strategy document.

The prime minister had come under heavy pressure from Conservative backbench MPs who oppose onshore wind, even though some of the government’s own polling shows the majority of the general public supports the technology.

The strategy stopped short of setting a firm target for solar power, another source that can be built quickly and relatively cheaply, but said it would look to increase the UK’s 14GW of capacity “up to five times by 2035”.

In the foreword to the document, the prime minister admitted that the benefits to consumers of the policies would not be felt for a long time, a point reinforced by Kwarteng who said the strategy would not yield results for at least three to five years and represented “more of a medium [-term solution]”.

Ed Miliband, Labour’s energy spokesperson, called the strategy “hopeless” and said the government was in “disarray” over the current cost of living crisis.

But the Climate Change Committee, an advisory group to the government, praised the strategy’s targets for offshore wind, nuclear and hydrogen — the latter of which was doubled to 10GW by 2030.

Mike Thompson, director of analysis at the CCC, said it was nevertheless disappointing “not to see more on energy efficiency and on supporting households to make changes that can cut their energy bills now”.

As part of its commitments on nuclear, the strategy confirmed the creation of a new task force, the “Great British Nuclear Vehicle”, to oversee projects and help build a “resilient” pipeline.

The strategy confirmed the government would look at “supporting” new nuclear projects, implying it would look at taking stakes in future nuclear power plants.

FT : Lebanon reaches preliminary $3bn deal with IMF

Lebanon reaches preliminary $3bn deal with IMF
Agreement marks first big step in tackling crippling economic crisis but full approval depends on reform package

Lebanon and the IMF have reached a preliminary agreement for a $3bn loan facility, the first significant step towards bringing relief from an economic and financial crisis that has crippled the country since 2019.

Two years after the onset of the crisis, the country’s currency has lost more than 90 per cent of its value and nearly three-quarters of its people live below the poverty line, according to the UN.

The long hoped-for bailout, announced on Thursday, is vital to stem the further collapse of the economy, but talks between the IMF and Lebanese authorities had repeatedly stalled over economic reforms required by donors.

“The [Extended Fund Arrangement] aims to support the authorities’ reform strategy to restore growth and financial sustainability, strengthen governance and transparency, and increase social and reconstruction spending,” the IMF said in a statement on Thursday.

Unveiling the deal following a meeting with IMF delegates in Beirut, Najib Mikati, Lebanon’s prime minister, said his government had promised the fund that it would implement wide-ranging reforms.

The crisis demanded “a comprehensive reform program” in order to achieve “financial and economic stability and . . . permanent and strong growth”, he said.

In its statement the IMF said: “This crisis is a manifestation of deep and persistent vulnerabilities generated by many years of unsustainable macroeconomic policies fuelling large twin deficits (fiscal and external), support for an overvalued exchange rate and an oversized financial sector, combined with severe accountability and transparency problems and lack of structural reforms.”

The fund arrangement would extend over 46 months and give Lebanon access to the equivalent of $3bn in special drawing rights. Full approval by the IMF board is contingent on Lebanon implementing a series of measures.

These include a restructuring strategy for the banking sector that limits the impact on small depositors and “recourse to public resources”; parliamentary approval of a bank restructuring law; and external evaluation of the 14 largest banks by a “reputable international firm”.

The agreement also requires reform of a decades-old banking secrecy law “to bring it in line with international standards to fight corruption”; completion of an audit of the central bank; parliamentary approval of the 2022 budget; and unification of the multiple official and black market exchange rates for the Lebanese pound that have existed since the crisis started.

The announcement is the first indication that Lebanon’s government is taking seriously the need to tackle the crisis, observers say. It also comes weeks before the country is due to hold a general election.

But given the Lebanese political establishment’s previous reluctance to implement reforms, the road to full approval by the IMF looked arduous, analysts warned.