WSJ : Argentina Heads for Another Crackup

Argentina Heads for Another Crackup
As it fails to honor its reform commitments, inflation is soaring. Sound familiar?

The resignation of Argentine Economy Minister Martín Guzmán on July 2 comes three months after he renegotiated his country’s $45 billion debt with the International Monetary Fund. The fund says the stabilization and growth program it worked out with Mr. Guzmán is still on track. But widespread fears that a sharp devaluation of the peso is coming, along with higher inflation, suggest otherwise. The country could be headed for another crackup.

The March rescheduling of the IMF debt wasn’t the first time Mr. Guzmán bought more time for the world’s most notorious deadbeat to repay what it has borrowed. In August 2020 he led a restructuring of some $65 billion in sovereign debt held by major bondholders such as Fidelity Management & Research Co., Monarch Alternative Capital LP, VR Capital Group, Greylock Capital Management and Pharo Management LLC.

The 39-year-old center-left economist should have been writing his own ticket inside the government of President Alberto Fernández. Instead, he found himself battling Vice President Cristina Fernández de Kirchner —no relation to the president—who opposes even the minor reform commitments he made to the IMF. Mrs. Kirchner won.

President Fernández quickly filled the vacancy created by Mr. Guzmán’s departure with Silvina Batakis, an ally of Mrs. Kirchner and her hard-left faction inside the Frente de Todos ruling coalition. Ms. Batakis’s resume isn’t reassuring. She’s a former minister of the economy for the province of Buenos Aires (2011-15) who left her successor with empty coffers and forced him to turn to the federal government for emergency help to pay the salaries of public employees.

On Wednesday IMF Managing Director Kristalina Georgieva tried to ward off panic. She tweeted that she’d had a “very good call” with Ms. Batakis, “to discuss implementation of Argentina’s program.” Reuters reported that Ms. Batakis “had already spoken with the head of the IMF’s Western Hemisphere department and committed to support the objectives of the [renegotiated] IMF program.”

Yet it’s worth recalling that a March 2022 IMF staff report on the Guzmán program warned that it is “subject to exceptionally high risks,” including that it “may fail to engender confidence and strengthen stability.” Those risks have now gone up. Both the Paris Club and Inter-American Development Bank say that any new lending arrangements require guarantees of reform commitments to the IMF.

Argentina is by far the fund’s largest borrower. To put its $45 billion debt in perspective, Egypt, the next-largest borrower, owes the Washington-based multilateral a mere $12 billion. Argentine borrowing at the IMF is now at 1,000% of its quota.

In December 2015 when center-right President Mauricio Macri took office, expectations were high that he would tackle the age-old Argentine practice of printing pesos to pay government bills. But he failed to right-size public spending, preferring a gradualist approach to working with a Congress he didn’t control.

By May 2018 international financing was drying up as markets began to lose faith in Mr. Macri. When the peso came under attack, the IMF stepped in with a $30 billion emergency package that soon became part of a $57 billion standby agreement. Mr. Macri lost his re-election bid in October 2019, but when he left office a few months later Argentina had drawn down $44 billion from that agreement.

Argentina had payments due of $19 billion this year and $20 billion in 2023. The “extended fund facility” that Mr. Guzmán secured delays those payments, pushing their start to the second half of 2026 and extending the life of the loan to 2034.

But that won’t save Argentines from another round of hyperinflation driven by government “experts” who believe in modern monetary theory—which posits that printing money to pay bills doesn’t have to cause inflation if tax rates are high enough.

The public knows better. Since 2017 the peso has lost 87% of its official market-rate value, which is now roughly 130 to the dollar. In the black market the currency now trades at around 265 to the dollar.

Argentine economist Aldo Abram told me last week that “inflationary expectations are spiraling out of control” because “the central bank is robbing the public of its purchasing power.” As demand to hold pesos collapses, triple-digit inflation is becoming more likely, he said. Even with lots of flexibility and latitude from the IMF, it’s hard to see how this doesn’t end in tears.

WSJ : What Happened to the Twitter-Elon Musk Deal?

What Happened to the Twitter-Elon Musk Deal?
Tesla CEO says he is seeking to terminate his $44 billion deal to buy the social-media platform, setting up a possible legal battle

Elon Musk said he is seeking to terminate his $44 billion deal to buy Twitter Inc., TWTR -5.10% nearly two months after saying the deal was “on hold” over his questions about the number of spam and fake accounts on the platform.

Twitter “is in material breach of multiple provisions of that agreement,” according to a letter from Mr. Musk’s lawyer filed with securities regulators. The letter also accused the company of making “false and misleading representations” when entering into the agreement.

Twitter said it intends to close the transaction at the agreed price of $54.20 a share, setting up a possible legal battle over what comes next for the social-media platform.

Here’s what to know.

Why did Elon Musk say he was pulling out of his deal to buy Twitter?
Mr. Musk said in a regulatory filing Friday that the company hadn’t provided the necessary data and information he needs to assess the prevalence of fake or spam accounts on the platform. In the filing, Mr. Musk’s lawyers said that Twitter had made material changes to the business without his consent, such as laying off some staff and implementing a hiring freeze.

What will happen next in the Twitter deal?
Twitter’s board on Friday said it would pursue legal action to enforce the terms of the deal at the price and terms originally agreed upon. “We are confident we will prevail in the Delaware Court of Chancery,” Bret Taylor, chairman of the board, tweeted.

Can Twitter sue Elon Musk?
Yes, and likely will. Under the terms of the agreement, Mr. Musk agreed to pay a $1 billion reverse termination fee to Twitter if the deal falls apart, though that is only triggered under certain scenarios including if his debt financing falls through or regulators try to block the deal. The merger agreement caps at $1 billion the amount either side can sue for damages for. So Twitter’s legal options now are to sue for a maximum of $1 billion, a fraction of what it stands to lose out on should the deal fall apart, or sue for specific performance. If it sues for specific performance and Mr. Musk agrees to settle, that could involve a payment of more than $1 billion.

What’s the current price of the Twitter stock?
Twitter shares closed at $36.81 on Friday, down 18% from the day Mr. Musk disclosed his offer. They fell 4.8% in after-hours trading following the disclosure.

Why were Twitter’s spam accounts a point of contention for Elon Musk?
Mr. Musk has said the spam and fake accounts issue is fundamental to Twitter’s business and financial performance, and that getting clarity is necessary for him to line up financing for the deal.

He tweeted in May that the deal was “on hold” over details about spam and fake accounts on the platform. The following month, he threatened in a letter to the company to end the deal if Twitter didn’t provide data he had requested. He has said the deal wouldn’t proceed unless he could see such data to evaluate the company’s claims about how many of its users are spam or fake accounts.

Many observers have speculated that Mr. Musk was using the fake accounts issue as leverage to renegotiate or exit the acquisition, given that he was aware of the issue long before agreeing to buy Twitter, and yet waived due diligence on the business prior to inking the deal.

Twitter has long estimated that spam or fake accounts represent fewer than 5% of its monetizable daily active users, which it most recently pegged at 229 million. Mr. Musk has said he thinks the number could be closer to 20%. Twitter provided access to the platform’s full fire hose of tweets, but data specialists say analyzing it isn’t easy.

Mr. Musk, as one of Twitter’s highest-profile users, is particularly susceptible to seeing spam on the platform, according to researchers.

In the regulatory filing, Mr. Musk’s lawyer said, “Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information.”

What are the financial stakes in the deal?
Mr. Musk had agreed in April to buy Twitter for $44 billion, or $54.20 a share.

He said he didn’t care about making money from the deal: “Having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. I don’t care about the economics at all,” Mr. Musk said in an April interview.

Mr. Musk, as he lined up financing for the deal, sold more than $8 billion in Tesla Inc. stock.

Shares in the electric-vehicle maker advanced more than 2% after Mr. Musk said he was done with his Twitter pursuit that had annoyed some of the billionaire’s Tesla fans.

Also potentially losing out in the deal are financial institutions looking to make it happen. Twitter’s bankers would stand to make tens of millions in advisory fees on closing, according to a previous regulatory disclosure. Goldman Sachs Group Inc. would stand to make around $80 million, including $15 million upfront, while JPMorgan Chase & Co. could make $53 million, including $5 million upfront.

Why was Elon Musk interested in the deal?
Mr. Musk has called Twitter the “de facto town square,” and said he wanted to buy the platform because he thought it was important for there to be “an inclusive arena for free speech.”

Mr. Musk, who has over 100 million followers on the platform, indicated he would seek to make substantial changes to the social-media site, including softening the way it moderates content and supporting an edit button for tweets—something the company was already working on. He also said he would try to eliminate bots, rely less on advertising and enable encrypted messaging. He said he planned to take the company private, which would have made it easier to implement desired changes without shareholder pressure.

FT : Europe regulator warns of ‘cautionary lesson’ from crypto crash

Europe regulator warns of ‘cautionary lesson’ from crypto crash
Verena Ross says investors cannot expect bailout because risks were so widely flagged

Crypto investors should take the market crash as a “cautionary lesson” about putting money into risky unregulated assets and cannot count on any kind of a bailout, Europe’s top securities regulator has said.

“We already warned earlier this year . . . about the serious risks retail investors were taking investing in some of the crypto assets,” said Verena Ross, chair of the European Securities and Markets Authority.

The global crypto market has fallen by more than 70 per cent in the past year and Ross said she was worried about the implications for small investors.

“I think there is a real question about whether many of these [crypto assets] will survive . . . I hope that some of these investors will see this and will take a cautionary lesson at least to think about how much of their money they invest in these kinds of assets.” 

She added there was no prospect of a European bailout for out-of-pocket investors because warnings about the dangers had been so widespread.

In March, ESMA and Europe’s other leading financial regulators warned consumers of the “very real possibility of losing all their invested money” if they bought cryptocurrency, using stronger language than a similar warning a year earlier.

“We have all said that this is something that is not currently regulated, not something where this is any control over the providers, [where] we know there is a lot of fraud and aggressive marketing going on,” Ross said, adding that regulators used social media to try to get their warnings across to audiences most engaged in crypto.

ESMA is preparing to assume licensing responsibility for Europe’s largest crypto asset services providers under a landmark deal agreed in Brussels last month, which also includes provisions such as mandatory environmental disclosures and some consumer protection for things like lost crypto wallets.

The deal comes into force from mid-2023 and has an 18 month implementation period. Ross said it was important to move as quickly as possible and to push for “convergence” of national rules already in place, echoing calls by the ECB last week.

ESMA is also watching developments in commodities and other markets as inflation and interest rates surge and the sharply deteriorating economic environment drives volatility.

“We see real risks of market reactions to the changing economic environment,” said Ross, adding that regulators are trying to understand “where those risks might be arising so that . . . at least we are conscious of what the significant market corrections are that could happen”.

(Makor - Oscar Gruss) TWTR-Musk – OG Risk Arb’s Initial Comments on Musk’s

July 8, 2022

TWTR-Musk – OG Risk Arb’s Initial Comments on Musk’s Termination

Letter

TWTR-Musk – OG Risk Arb initial comments on Musk’s termination letter. As

a general matter, we agree with TWTR’s PR responding to Musk’s letter,

TWTR should be confident they will prevail in Delaware Chancery Court

where they plan on pursuing legal action to enforce the merger agreement.

Among other things, we note the following:

• Musk’s termination letter is weak and premature. The

letter makes essentially five arguments in favor of termination:

(1) failure to provide after repeated requests over a period of

time longer than the 30 day cure period requested information

regarding the percentage of bot accounts pursuant to section

6.4; (2) failure to provide information regarding TWTR’s financial

condition pursuant to 6.11 needed for the financing; (3) MAC

level misrepresentation of the percentage of bots in TWTR’s SEC

filings; (4) MAC based on deterioration of TWTR fundamental

performance; and (5) ordinary course violation due to TWTR

firing certain employees without prior consent pursuant to

section 6.1.

o Musk’s information request termination grounds (1

and 2 above) are contrary to the express language of

the merger agreement and would essentially create

a universal out from nearly any merger contract --

Musk attempts to manufacture grounds for termination

with respect to (1) and (2) above by sending repeated

increasingly specific requests for information which seem

designed to create an impression of non-compliance even

though Musk admits TWTR produced information in

response to many of his requests which he was unable to

use to prove his contention that the bot % is materially

higher than 5%; Musk’s claim amounts to saying TWTR

breached its information production obligation because

2

Musk was unable to prove his contention that there are

materially more than 5% bots;

§ TWTR produced information in good faith which likely

exceeded its obligations under section 6.4 of the

merger agreement which states in relevant part that

TWTR “shall (and shall cause each of its Subsidiaries

to) furnish promptly to such Representatives [Musk]

all information concerning the business, properties

and personnel of the Company and its Subsidiaries

as may reasonably be requested in writing, in each

case, for any reasonable business purpose related to

the consummation of the transactions contemplated

by this Agreement; provided, however, that nothing

herein shall require the Company or any of its

Subsidiaries to disclose any information to Parent or

Acquisition Sub if such disclosure would, in the

reasonable judgment of the Company, (i) cause

significant competitive harm to the Company or its

Subsidiaries if the transactions contemplated by this

Agreement are not consummated, …’);

§ Sect. 6.11 contains language which makes Musk’s

arguments regarding failure to provide information

regarding financing extraordinarily hard to win; in

this regard Sect. 6.11 provides in relevant part that:

“The parties hereto agree that any information with

respect to the prospects, projections and plans for

the business and operations of the Company and its

Subsidiaries in connection with the Financing will be

the sole responsibility of Parent, and none of the

Company, any of its Subsidiaries or any of their

respective Representatives shall be required to

provide any information or make any presentations

with respect to capital structure, the incurrence of

the Financing, other pro forma information relating

thereto or the manner in which Parent intends to

operate, or cause to be operated, the business of the

Company or its Subsidiaries after the Closing….

Notwithstanding anything to the contrary contained

in this Agreement, the Company will be deemed to

3

be in compliance with this Section 6.11(a), and

neither Parent nor any of its Affiliates shall allege

that the Company is or has not been in compliance

with this Section 6.11(a), unless Parent’s failure to

obtain the Bank Debt Financing was due solely to a

deliberate action or omission taken or omitted to be

taken by the Company in material breach of its

obligations under this Section 6.11(a).”;

§ in light of the contract language above, we find it

hard to believe a Delaware Court will find this basis

for termination to be persuasive as it essentially

would create a universal out for merger contracts by

allowing buyers with buyer’s remorse to serve

numerous increasingly specific information requests

and then if unsatisfied with the responses assert a

right to termination;

§ we also note that given TWTR’s production of

information it seems premature to declare the 30

day cure period has run out as essentially all of the

information requests are related so TWTR has been

complying with many of the requests so it is not

clear the cure period has passed;

§ finally, we note that Musk waived his due diligence in

the deal; his attempt to argue that section 6.4 and

6.11 essentially gives him the right to do due

diligence after the deal is announced is contrary to

the intent of these provisions which are meant to

supplement not replace pre-deal due diligence;

o Musk’s MAC arguments (grounds 3 and 4 above) lack

factual foundation and are premature -- Musk’s MAC

argument based on the 5% bot SEC representation is weak

because Musk admits that he does not have enough

information to prove TWTR’s 5% calculation is incorrect or

misleading; lack of information is not a valid basis for

asserting a MAC; absent a contrary bot %

calculation/methodology presented by Musk or proof that

TWTR intentionally decided not to use a more accurate

method to calculate bot percentages, this argument is not

4

really an independent grounds to get out of the merger

contract;

§ Musk’s MAC argument based on a generic allegation

of fundamental deterioration does not appear to be

based on any event or specific facts and seems

designed to allow for a fishing expedition where

Musk looks for a basis for a MAC argument after

asserting a MAC argument; Delaware requires an

event to be predicate for a MAC not generic

allegations of deteriorating performance;

o Musk’s ordinary course argument based on not

seeking consent to fire certain employees is not

supported by the language of Section 6.1; firing

employees is not an enumerated restricted behavior under

subsections (a) through (q) of section 6.1; there is no

credible argument that the general lead in ordinary course

language in section 6.1 implies TWTR need seek Musk’s

consent to firing employees; as Musk does not allege a

non-public disclosure schedule prohibits the firing of

certain employees, this portion of Sect. 6.1 language

applies: “x) the Company shall use its commercially

reasonable efforts to conduct the business of the Company

and its Subsidiaries in the ordinary course of business

(except with respect to actions or omissions that

constitute COVID-19 Measures), and to the extent

consistent therewith, the Company shall use its

commercially reasonable efforts to preserve substantially

intact the material components of its current business

organization, and to preserve in all material respects its

present relationships with key customers, suppliers and

other Persons with which it has material business

relations; provided that no action by the Company or its

Subsidiaries with respect to the matters specifically

addressed by any provision of this Section 6.1 shall be

deemed a breach of this sentence, unless such action

would constitute a breach of such relevant provision”;

nothing in this language requires TWTR to seek consent

from Musk to fire executives or suggests that such activity

5

in inconsistent with TWTR’s ordinary course obligations

under the merger agreement; and

• Musk’s decision to terminate now shows he knows he has

a weak position which he knows is unlikely to get

stronger -- this premature termination implies that Musk is

only seeking a small price cut before the shareholder vote; even

though we think TWTR’s position is very strong in court we think

it would be in TWTR’s interest to agree to a small price cut (sub

10%) in exchange for Musk waiving all his arguments; we

acknowledge that with Musk you cannot rule out that he might

refuse to close again even after agreeing to a price cut but since

we believe he actually wants to buy TWTR we think that is very

unlikely.

If you would like to discuss any of this in any more detail, please do not

hesitate to call me at 914-441-1629.

Eric K. Laumann

Head of North American Risk Arbitrage Research

Oscar Gruss & Son Incorporated

401 North Michigan Avenue, Suite 1200

Chicago, IL 60611

Ph: 212-419-4018

Cell: 914-441-1629

DISCLAIMER This information represents neither an offer to buy or sell any security nor, because it does

not take into account the differing needs of individual clients, investment advice. Those seeking investment

advice specific to their financial profiles and goals should contact their Oscar Gruss & Son Incorporated sales

representative. Oscar Gruss & Son Incorporated believes this information to be reliable, but no

representation is made as to accuracy or completeness. This information does not analyze every material

fact concerning a company, industry, or security. Oscar Gruss & Son Incorporated assumes that this

information will be read in conjunction with other publicly available data. Matters discussed here are subject

to change without notice. There can be no assurance that reliance on the information contained here will

produce profitable results. A security denominated in a foreign currency is subject to fluctuations in currency

exchange rates, which may have an adverse effect on the value of the security upon the conversion into

local currency of dividends, interest, or sales proceeds. The value of securities and depositary receipts of

foreign issuers that are denominated in United States dollars are also influenced by fluctuations in currency

exchange rates. © 2022 Oscar Gruss & Son Incorporated. All rights reserved.

>>> Weekend Papers Summary

Weekend Papers Summary

NEW YORK TIMES
-Shinzo Abe, Japan’s longest-serving prime minister, became perhaps the most transformational politician in the country’s post-World War II history.
His assassination sets off a race to lead one of the most powerful factions of the Liberal Democratic Party. And his influence, scholars say, will be lasting.
-Shinzo Abe’s assassination was especially hard to fathom because it involved a gun — an extremely rare type of crime in Japan.
-Japanese police said the man charged with killing Shinzo Abe had a “grudge” against a group he associated with the ex-prime minister. Mr. Abe’s body arrived Saturday at his home in Tokyo.
-Strong wage and jobs growth is keeping the Federal Reserve on track for big rate increase. The Fed is trying to cool down the economy to bring inflation under control, but the job market is still going strong.
-The US economy added 372,000 jobs last month, easing worries of a slowdown, but also complicating the Fed’s attempt to quell inflation.
-Elon Musk moves to end $44B deal to buy Twitter. In a regulatory filing on Friday, Mr. Musk said Twitter was in “material breach” of the acquisition agreement.
-The far-right Christian quest for power: ‘we are seeing them emboldened’. Political candidates on the fringe mix religious fervor with conspiracy theories, even calling for the end of the separation of church and state. Doug Mastriano, a Republican candidate for Pennsylvania governor, called the separation of church and state a "myth."
-As Russia looms, a Ukrainian city’s loyalties divide. Most residents have fled the eastern city of Sloviansk before an expected assault. About half of the 23,000 remaining are eager to welcome the invaders.
-Russia’s Lavrov was a pariah at Group of 20 Event, but only for some
Secretary of State Antony J. Blinken. And other Western foreign ministers refused to meet with the Russian diplomat, but for many others it was business as usual.
-Louisiana judge allows abortion ban to take effect. The fast-changing status in the state is emblematic of the chaotic national landscape that has unfolded since the Supreme Court overturned Roe v. Wade.
-Under pressure, Biden issues an executive order on abortion. Some of President Biden’s supporters wanted him to push harder to protect abortion access. But details about what his new order will do remain unclear.
-Health officials said the subvariants known as BA.4 and BA.5 were fueling a rise in cases after most Covid policies were relaxed. Catch up on pandemic news.
-Columbia University loses its no. 2 spot in the U.S. news rankings. US News & World Report said that it had “unranked” the Ivy League university after being unable to verify its data.
-A deadly confrontation at a Harlem store that drew attention from Mayor Eric Adams feeds a broader debate about crime and politics.
President Biden signals support for controversial Alaska oil project. President Biden’s administration took a key step toward approving the Willow project. Opponents say drilling would violate a pledge to rein in fossil fuel.

THE FINANCIAL TIMES
-Elon Musk has notified Twitter that he intends to terminate his agreement to buy the social media group for $44B, accusing it of disclosing “false and misleading” information about the number of fake and spam accounts.
Musk’s attempt to pull out of the deal sets the stage for a high-stakes legal battle between the billionaire Tesla chief executive and the social media platform. Twitter’s chair, Bret Taylor, responded swiftly, saying the board was “committed to closing the transaction on the price and terms agreed upon with Mr Musk” and would pursue legal action to enforce the agreement.
-Shinzo Abe, a polarizing, nationalist scion of an elite political dynasty and Japan’s longest-serving prime minister, defined an era of reform and invited the world to reassess the giant Asian economy under his Abenomics banner. He died after being shot during a campaign speech in western Japan at the age of 67.
-Labour is planning a vote of no confidence in Boris Johnson to try to force him out of Downing Street immediately, because of concerns he might abuse his role as caretaker prime minister. Angela Rayner, deputy Labour leader, said Johnson was “engulfed in sleaze” and should not be allowed to continue in office.
-Boris Johnson’s allies aim to stop Rishi Sunak becoming Conservative party leader and are accusing the former chancellor of treachery for triggering the prime minister’s premature exit.
-Russian president Vladimir Putin has threatened “catastrophic consequences” for world energy markets if western powers impose further sanctions on Moscow, as G7 members discuss plans to try to cap Russia’s oil revenues following its invasion of Ukraine. The Russian president admitted that sanctions were undoubtedly hurting Russia’s economy but said western powers stood to inflict more harm on themselves as they wrestle with rising inflation and a growing cost of living crisis.
-Federal Reserve vice-chair Lael Brainard has said recent crypto volatility has exposed “serious vulnerabilities” in an industry in need of tighter regulation. Brainard told a Bank of England conference in London on Friday that crypto is not yet “so large or so interconnected” with traditional finance to pose systemic risk but raises familiar regulatory concerns.
-20 Years ago, Wang Chuanfu, the Chinese billionaire, unveiled plans for his BYD group to buy a failing state car manufacturer that had attempted to develop a sideline in making missiles.
His logic: rip out the petrol guzzling internal combustion engines from the cars and replace them with batteries. For BYD shareholders who thought they had invested in a more humdrum maker of batteries for mobile phones, the strategy “seemed loaded with nutty ambition”, according to an analyst. But six years later, Wang pulled off a coup when Warren Buffett invested $232M in BYD. This week, Wang’s vision — and Buffet’s bet — was validated when BYD snatched Tesla’s crown as the most popular maker of battery-driven cars. Half-year sales figures showed that BYD — short for “build your dreams” — sold more vehicles than Tesla.
-Intense labor demand stoked another strong month of US jobs gains, defying expectations for a sharper slowdown and giving the Federal Reserve greater leeway to continue raising interest rates to stamp out soaring inflation.
-US president Joe Biden on Friday announced measures designed to maintain access to abortion and urged women to vote in November’s midterm elections, as his administration looks to limit the fallout of the Supreme Court’s decision to overturn Roe vs Wade. Biden spoke from the White House about how he intends to make sure Americans can still get abortions even after the country’s highest court struck down the decades-long precedent that guaranteed a right to an abortion, paving the way for multiple states to ban or restrict the procedure.
-Prosecutors on Friday said three former members of JPMorgan Chase’s precious metals trading desk “scammed the market” as part of a years-long criminal conspiracy to manipulate the global silver and gold markets.
-Prosecutors on Friday said three former members of JPMorgan Chase’s precious metals trading desk “scammed the market” as part of a years-long criminal conspiracy to manipulate the global silver and gold markets.
-Two of Europe’s largest airlines, Lufthansa and KLM, took the rare step of restricting sales of all but their most expensive tickets while cancelling another set of flights as the disruption gripping aviation worsened. The two airlines adopted the measures to help ease the travel problems caused by staff shortages and the rise in demand for seats since the relaxation of Covid-19 rules.

NY POST
-It’s official. Chris Cuomo is back.The disgraced former CNN anchor posted an Instagram Reel on Friday with shots of him shirtless, smoking a cigar and flexing his muscles. “Something’s coming . . . Summer ’22,” Cuomo, 51, teased, while he also showed off his chest tattoo.The journalist’s tease was greeted with much fanfare from his followers.
- The suspect who shot dead Shinzo Abe on Friday believed the former Japanese prime minister was involved in a “specific organization” — and that his grudge wasn’t political, police said. The suspected killer, Tetsuya Yamagami, 41, was tackled to the ground just moments after he allegedly opened fire on the 67-year-old former leader as he delivered a campaign speech in the western region of Nara. In an interview with investigators, Yamagami allegedly admitted to plotting to kill Abe because he thought the ex-prime minister was connected to an organization that he bore a grudge against.
-Former Clinton Treasury Secretary Larry Summers is defending his comments from last month in which he claimed that millions of Americans may need to lose their jobs in order for inflation to come under control. Summers, who has emerged as a chief critic of the Biden administration’s economic policies, told the London School of Economics recently: “We need five years of unemployment above 5% to contain inflation — in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment.”

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Recent stock market returns did not make it easy to assemble Barron’s 17th annual list of top-performing CEOs

Cover Story:
Recent stock market returns did not make it easy to assemble Barron’s 17th annual list of top-performing CEOs. Still, a process was used that started with stripping last year’s list of names to none—similar to what the cost-cutters call zero-based budgeting. The Barron’s ‘judges’ then screened the market for signs of financial strength and improvement, but only lightly, in order to quickly turn the matter over to our panel of editors and beat reporters. Stages of their work included nominee selection, initial debate, further research, gradual compromise, advanced wrangling, and final agreement.

Interview:
This week Barron’s interviews Henry McVey, CEO of KKR. McVey is fond of saying that KKR “eats its own cooking” when it comes to investing. As a partner, chief investment officer of the investment firm’s $27.4B balance sheet, and head of its global macro and asset allocation strategy, McVey is responsible for forming a view on global macroeconomic trends that move asset prices. In addition, he allocates the firm’s own portfolio, using a balance sheet that allows KKR to invest alongside its clients across more than 30 investment strategies.

Tech Trader:
-There are six trends affecting tech stocks – and negatively. Analysts are rushing to cut estimates for tech stocks of every variety, cognizant that consensus forecasts don’t reflect the blizzard of recent ugly financial and geopolitical developments. You are going to hear talk in coming weeks that second-quarter results—and what will undoubtedly be soft guidance for the rest of the year—could serve as a “clearing event” and set the stage for improved market performance later. But keep in mind that there are many shoes left to drop, and more losses to absorb.

The Trader:
Why has the market reacted so enthusiastically to the week’s news? Investors entered the week hoping, if not for a recession, then for at least some signs that the economy is slowing enough to keep the Federal Reserve from aggressively raising interest rates further. But the ISM Non-Manufacturing Index came in stronger than expected, as did durable-goods orders and the Jolts job openings report. The June payrolls data, the highlight of the economic reports, looked particularly strong: The economy added 372,000 jobs last month, nearly 100,000 more than economists had predicted—and that initially caused the stock market to sell off.
-Top-performing shares, aka momentum stocks, typically stay hot because investors are naturally attracted to what’s been doing well. It’s a circular idea, but there’s usually no arguing with the results. That’s not the case right now. The iShares MSCI USA Momentum Factor ETF has dropped 24% in 2022, worse than the S&P 500SPX –0.08%’s 18% decline. Momentum is among the worst-performing factors this year, trailing only growth. But even growth stocks have rallied in July—the Invesco S&P 500 Pure Growth ETF has climbed 5.1%—while the Momentum ETF is up just 1%. So, chasing winners has been a losing strategy.

Features:
-On June 30, Manhattan federal Magistrate Judge Sarah Cave recommended class-action status for an antitrust case in which a trio of pension funds allege that the big brokers ran a cartel that extracts unfair profits from stock lending. Stock loans are a key part of short sales and options trades carried out by hedge funds, as well as a source of profit for pension and mutual funds.
-If Elon Musk succeeds in ending his deal to buy Twitter, it could be a positive for Tesla shareholders. The potential purchase of the social media platform has been an overhang for Tesla investors for weeks and Tesla stock has been underperforming the market. Musk said he would terminate the deal to buy the social media company, claiming it had breached the terms of agreement by refusing to provide detailed information about fake accounts on the site.

European Trader:
-Investors considering drinks maker Diageo have to ask themselves one question. “Do Americans feel the same way about tequila that Winston Churchill felt about Champagne?”
Britain’s World War II prime minister clarified his affection for Champagne in both good times and bad thus: “In victory I deserve it. In defeat I need it.”

Diageo, the world’s largest spirits maker and the owner of more than 200 brands including Smirnoff vodka, Johnnie Walker whisky, and Tanqueray gin, has made a big marketing bet on tequila and the U.S. market.

Emerging Markets:
-Brazil is back to being the market of the future, again. The iShares MSCI BrazilEWZ ETF enjoyed a brief turn as a world beater early this year, climbing 40% during the first quarter. It has cratered by 30% since then. Equities have overshot the swing in Brazil’s key export commodities. Iron ore prices have plunged since April 1, but oil and soybeans are about even. So, stocks look cheap, in theory. In practice, investors are crouched against more volatility. “It’s not a great setup from a top-down perspective,” says Verena Wachnitz, a portfolio manager for Latin American equities at T. Rowe Price. “We need to get past the election, and start to talk about rates coming down.”

Commodities:
Energy stocks are on sale, after a sharp selloff since oil and natural-gas prices peaked in early June. Oil is down 18% from its high, to $102 a barrel, while gas has fallen by a third, to about $6 per million British thermal units.
The Energy Select Sector SPDRXLE –ETF, dominated by Exxon Mobil and Chevron, has dropped 23%, to $71, and the more volatile SPDR S&P Oil & Gas Exploration & Production ETF is off 30%, to $119.

Streetwise:
-Beans and corn have caught Jack Hough’s attention, and not just because ShopRite put summer succotash on sale. Prices for America’s two biggest cash crops are well off recent highs. Corn is down 12% just since late June. Soybean oil has slipped 25% since mid-May. Meanwhile, shares of ingredient makers Archer-Daniels-Midland, Bunge, and Darling Ingredients have been falling much faster than the market.