Tag: banking

Biden has a big oil problem. Here’s what you need to know about the recent OPEC+ decision. | CNN Politics

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A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.

Washington
CNN
—

With just weeks to go until the November midterms, four letters are haunting President Joe Biden and the Democrats: OPEC.

Last week, the Organization of Petroleum Exporting Countries (OPEC) and its allies, led by Saudi Arabia and Russia, said that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.

The group announced the production cut following its first meeting in person since March 2020. The reduction is equivalent to about 2% of global oil demand.

The Biden administration criticized the decision in a statement, calling it “shortsighted” and saying that it’s harmful to some countries already struggling with elevated energy prices the most.

The production cuts will start in November. OPEC+, which combines OPEC countries and allies such as Russia, will meet again in December.

For one perspective on the OPEC+ decision and to better understand how it affects everyone, we turned to Hossein Askari, who teaches international business at The George Washington University.

Our conversation, conducted over the phone and lightly edited for flow and brevity, is below.

WHAT MATTERS: Can you walk us through this recent OPEC decision? What’s happening exactly?

ASKARI: So when the war in Ukraine started, sorry to tell your audience, but the United States was not very well prepared in what it was going to do. It sanctioned Russia for this and for that. And so the price of oil started going up. And at the same time, the United States actually put sanctions on Russian oil, not on gas, on oil. And so there was less Russian oil in the Western markets.

Russia actually started selling its oil more and more to China and to India and cutting its prices to those countries. So they would buy Russian oil, but there was a shortage of oil.

Another reason why the shortage had developed was America basically sanctions like a mad cowboy, if I may say that. It has sanctioned Venezuela for many years.

But Saudi Arabia, with the new effective ruler who’s known as MBS, he has cozied up to Putin. And so when President Biden went and saw him a few months back and kind of asked him to increase oil production – I’m sorry to say this, I have to throw in this bit of politics – I think America really shamed itself by doing that.

Of course, MBS did not respond positively. But now he, in fact, has gone over the top. He has agreed within OPEC – and of course he’s the main spokesman in OPEC with Russia – that they will cut back.

WHAT MATTERS: What does the OPEC decision mean for the average American?

ASKARI: From where we are now, crude oil prices by the end of the year, my guess, maximum, they’ll go up by $5 a barrel. Now, a lot of people think they’re gonna go up more than that. I don’t believe that, because I think the world economy is going to grow less and I think that we are going to see some Venezuelan oil come on the market, and I think we may see some deals made so some more Iranian oil may come on the market.

For gasoline, I think Americans can see maybe prices going up from where they are today, if nothing else happens, by about another 30 to 50 cents a gallon.

However, there is also another problem for Americans that is home heating oil, and that can also go up. So for the average American, they’re going to pay, no matter what, something more per gallon of gasoline at the pump. And I think there’s going to be more of an impact, actually, on the fuel oil that they heat their houses with. So it’s gonna put on the squeeze on the average American. There’s no two ways about it.

WHAT MATTERS: What should the US do now?

ASKARI: I think the United States should be much, much tougher with Saudi Arabia because we have bent over backward to accommodate them in every way. And we have looked the other way with what they’ve done. And now it’s the time to be tough. They’ve been tough with us. I think the President of the United States should be tough with Saudi Arabia.

WHAT MATTERS: What else can the US do in terms of helping with oil prices in the immediate term?

ASKARI: I think undoubtedly this administration has very bad rapport with US oil companies and energy companies. I think that there should be more behind-the scenes cooperation with the oil companies and the administration because you really need them now to cooperate.

I know a lot of people don’t believe in fracking, but maybe it’s time to do some more fracking. Maybe it’s time to increase output. They can increase output elsewhere too. I think that would be extremely, extremely helpful.

And I think the US oil companies – and I’m not a backer of oil companies, please don’t misunderstand – but I think they feel that the administration basically just wants to drive them out business.

WHAT MATTERS: Anything else you’d like to add?

ASKARI: Some people think that OPEC decisions are purely economic. Some people think purely political. It has always been both, especially for Saudi Arabia.

It is really Saudi Arabia and the United Arab Emirates driving OPEC’s decision. I think Americans should understand it’s not the other members, it’s not Nigeria or Iran. I feel Americans should understand who are our friends and who are not our friends.

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October 10, 2022
Will the stock market be open on Columbus Day?

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It’s a regular day of business for the U.S. stock market on Monday, October 10, as equity exchanges stay open for Columbus Day, a federal holiday that also has been recognized as Indigenous Peoples’ Day.

Bond markets, however, take the day off, which means a long weekend for the Treasury market, corporate bonds and other forms of tradable debt, starting after the close of business on Friday.

Stocks have endured a brutal selloff in the first nine months of the year as the Federal Reserve has worked to fight inflation that’s been stuck near it highest levels since the early 1980s.

See: Why stock-market bulls keep falling for Fed ‘pivot’ feints — and what it will take to put in a bottom

The central bank’s main tool to battle inflation has been to dramatically increase interest rates, while also shrinking its balance sheet, in an effort to tighten financial conditions and squelch demand for goods and services, while also bringing down stubbornly high costs of living, including food, shelter and energy prices.

The Fed’s focus in recent months also has been on cooling the roaring labor market, with strong wage gains in the past year viewed as one of several culprits behind elevated inflation.

Friday’s jobs report for September pegged the unemployment rate as matching a prepandemic low of 3.5%, dashing hopes for now of a significant trend toward a pullback in the labor market.

The S&P 500 index
SPX,
-2.80%
tumbled 2.8% on Friday, the Dow Jones Industrial Average
DJIA,
-2.11%
fell 630.15 points, or 2.1%, and the Nasdaq Composite Index
COMP,
-3.04%
dropped 3.8%. An early October rally had offered some hope for a bounce for stocks, after a brutal first nine months for investors.

Bonds also have undergone a painful repricing this year as volatility tied to the Fed’s monetary tightening campaign has eroded the value of bonds issued in the past decade of low rates.

Read: Bond markets facing historic losses grow anxious about Fed that ‘isn’t blinking yet’

The S&P 500 is down about 24% for the year, while the Dow is off 19% and the Nasdaq nearly 32%.The 10-year Treasury rate
TMUBMUSD10Y,
3.889%
was near 3.9% Friday, after recently touching 4%, it’s highest since 2010

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October 9, 2022
Elon Musk’s bumpy road to possibly owning Twitter: A timeline | CNN Business

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CNN Business
—

A board seat accepted and then rejected. A stunning $44 billion takeover offer with uncertain financing. And a surprise early morning tweet putting the deal on hold, temporarily.

Even by the standards of Twitter, a company that has known plenty of chaos and dysfunction in its history, the weeks-long effort by billionaire Elon Musk to buy the company has proven to be uniquely tumultuous – and there’s no clear end in sight.

Should the deal go through, it would place the world’s richest man in charge of one of the world’s most influential social media platforms. The acquisition has the potential to upend not just Twitter itself but politics, media and the tech industry. The Tesla and SpaceX CEO has repeatedly stressed that his goal is to bolster what he calls “free speech” on the platform, by which he means all legal speech that complies with local laws in the markets where Twitter operates. He has also said he would reverse Twitter’s ban of former President Donald Trump.

But the attempt by Musk, a wildly successful entrepreneur with a history of erratic behavior, to buy Twitter has been viewed with some skepticism from the start. On the day he made his offer, Musk said: “I’m not sure I’ll actually be able to acquire it.” Some have questioned how he would finance the deal, especially as shares of Tesla

(TSLA), which he’s partially using to back his financing of the Twitter deal, and the broader tech sector have declined in the weeks since.

After Musk recently said he was temporarily pausing the deal so he could assess the amount of spam and fake accounts, it prompted speculation that the billionaire might be looking to renegotiate the deal – or back out of it entirely. His actions in the days that followed only reinforced that thinking.

Here is a look back at the many twists and turns in one of the most high-profile tech deals in recent memory.

Musk starts quietly buying up Twitter shares, building his stake in the company. But it would be months before he disclosed this fact to the public.

Musk’s stake in Twitter tops 5%, but that fact is not disclosed until the following month. Musk was obligated to disclose his stake within 10 days of crossing the 5% threshold, but waited 21 days to do so. During that time, he continued building up his stake.

The billionaire begins to make pointed statements about the platform from his account. “Twitter algorithm should be open source,” he wrote, with a poll for users to vote “yes” or “no.”

The following day, Musk tweets out another poll to his followers: “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?”

Musk reaches out to Twitter cofounder and former CEO Jack Dorsey to “discuss the future direction of social media,” according to a company filing later put out by the company. The two tech founders are known to have a bit of a billionaire bromance on and off Twitter.

Twitter’s board and some of its leadership team meet with representatives from Wilson Sonsini, a law firm, and J.P. Morgan to discuss the possibility of Musk joining the company’s board, according a later securities filing. Dorsey is said to have told the board that “he and Mr. Musk were friends,” according to the filing.

In the meeting, the Twitter board discussed wanting Musk to agree to “‘standstill’ provisions”,” according to the filing. This would effectively “limit his public statements regarding Twitter, including the making of unsolicited public proposals to acquire Twitter (but not private proposals) without the prior consent of the Twitter Board.”

Musk is revealed to be Twitter’s largest individual shareholder, with a more than 9% stake in the company.

News of the purchase sends shares of the social media company soaring more than 20% in early trading and kicks off a wave of speculation about how Musk might push for changes on the platform.

Twitter CEO Parag Agrawal announces Musk will join Twitter’s board of directors. “Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board,” Agrawal says in a post on Twitter.

As part of the appointment, Musk agrees not to acquire more than 14.9% of the company’s shares while he remains on the board. His term on the board is set to go through 2024, according to a regulatory filing.

Agrawal announces that Musk has decided not to join the board after all. “I believe this is for the best,” Agrawal writes in a letter to the Twitter team.

The reversal opens the door for Musk to pursue a greater stake in the company – and frees him to tweet his many thoughts about the company.

Musk stuns the industry by making an offer to acquire all the shares in Twitter he does not own at a valuation of $41.4 billion. The cash offer represents a 38% premium over the company’s closing price on April 1, the last trading day before Musk disclosed that he had become the company’s biggest shareholder.

“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy. However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company,” Musk writes in his offer letter. “Twitter has extraordinary potential. I will unlock it.”

Twitter’s board of directors adopts a “poison pill” provision, a limited-term shareholder rights plan that potentially makes it harder for Musk to acquire the company.

Musk lines u p $46.5 billion in financing for the deal, including two debt commitment letters from Morgan Stanley and other unnamed financial institutions and one equity commitment letter from himself, according to a regulatory filing.

The billionaire also reveals that he has not received a formal response from Twitter a week after his acquisition offer. He said he is “seeking to negotiate” a definite acquisition agreement and “is prepared to begin such negotiations immediately” — an apparent reversal from his statement in his acquisition offer letter that it would be his “best and final” offer.

Although he is the richest person in the world, much of Musk’s wealth is tied up in Tesla stock, and some followers of the company speculate that it could be challenging for Musk to raise debt against the historically volatile stock.

Twitter announces that it has agreed to sell itself to Musk in a deal valued at around $44 billion. At a conference later in the day, Musk describes his offer to buy Twitter in characteristically sweeping terms as being about “the future of civilization,” not just making money.

At an all-hands meeting that afternoon, Twitter employees raise questions about everything from what the deal would mean for their compensation to whether former US President Donald Trump would be let back on the platform.

Filings reveal Musk sold $8.5 billion of his Tesla stock in the three days after Twitter board agreed to the sale for an average of $883.09 per share. The filings did not disclose the reason for the sale, but Musk appeared to be raising funds to buy Twitter.

Musk raises another $7 billion in financing for the deal. The new investors include Oracle founder Larry Ellison, cryptocurrency platform Binance and venture capital firm Sequoia Capital, according to a filing.

Musk aims to increase Twitter’s annual revenue to $26.4 billion by 2028, up from $5 billion last year, according to a New York Times report, citing Musk’s pitch deck presented to investors. To achieve that lofty goal, Musk intends to bolster Twitter’s subscription revenue and build up a payments business while decreasing the company’s reliance on advertising sales, according to the report.

Musk confirms what many have assumed for weeks: he would reverse Twitter’s Trump ban if his deal to buy the company is completed.

“I do think it was not correct to ban Donald Trump, I think that was a mistake,” Musk said. “I would reverse the perma-ban. … Banning Trump from Twitter didn’t end Trump’s voice, it will amplify it among the right and this is why it’s morally wrong and flat out stupid.”

Twitter confirms to CNN Business that the platform is pausing most hiring and backfills, except for “business critical” roles, and pulling back on other non-labor costs ahead of the acquisition. In addition, Twitter says general manager of consumer, Kayvon Beykpour, and revenue product lead, Bruce Falck, are leaving the company.

Musk tweets that the deal is on hold, linking to a Reuters report from nearly two weeks earlier, about Twitter’s most recent disclosure about its amount of spam and fake accounts. The figure cited in the report, however, is in line with prior quarterly disclosures.

“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk tweeted.

Shares of the social media site plummet after Musk’s announcement, dropping more than 10% at market open. Two hours after announcing the hold, Musk says he remains set on purchasing Twitter. “Still committed to acquisition,” he wrote.

Later in the day, Musk says his team is testing Twitter’s numbers and “picked 100 as the sample size number, because that is what Twitter uses to calculate

Musk tweets out that Twitter’s legal team accused him of breaking a nondisclosure agreement when the billionaire revealed the platform’s sample size for automated user checks is allegedly just 100 users.

“Twitter legal just called to complain that I violated their NDA by revealing the bot check sample size is 100! This actually happened,” wrote Musk.

The standoff over bot accounts continues as Musk exchanges a series of tweets with Agrawal over the issue. After Agrawal carefully explains how Twitter attempts to combat and measure spam accounts, Musk responds with a poop emoji.

Musk follows up with a somewhat more thoughtful question. “So how do advertisers know what they’re getting for their money?” Musk asked. “This is fundamental to the financial health of Twitter,” he added.

Musk announces that his acquisition of Twitter “cannot move forward” until he sees more information about the prevalence of spam accounts, claiming that the social media platform falsified numbers in filings. Without citing a source, he claims in a tweet that Twitter is “20% fake/spam accounts” and suggests Twitter’s previous filings with the SEC were misleading.

Later in the day, Musk posts a poll to his Twitter followers: “Twitter claims that >95% of daily active users are real, unique humans. Does anyone have that experience?” before calling on the SEC to evaluate the platform’s numbers. “Hello @SECGov, anyone home?” Musk tweets, in an apparent attempt to get the regulator to look into the matter.

In a statement, Twitter says it remains “committed to completing the transaction on the agreed price and terms as promptly as practicable.” Later, the company says it intends to “enforce the merger agreement.”

In a letter to Twitter’s head of legal, Musk threatens to walk away from his purchase of the platform, alleging that Twitter is “actively resisting and thwarting his information rights” as outlined by the deal.

In the letter, an attorney for Musk accuses the social media company of breaching the merger agreement by not providing the data he has requested on Twitter spam bots, stating that the lack of information gives him a right “not to consummate the transaction” and “to terminate the merger agreement.”

Musk moved to terminate the acquisition agreement. A lawyer representing him claimed in a letter to Twitter’s top lawyer that the company is “in material breach of multiple provisions” of the deal over its alleged failure to provide all the data Musk says he needs to evaluate the number of spam and fake accounts on the platform.

“For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform,’” the letter reads. “This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement. … Twitter has failed or refused to provide this information.”

Twitter was not having it.

“The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement,” Twitter board chair Bret Taylor said in a tweet Friday, echoing earlier statements by the company that it planned to follow through with the deal. “We are confident we will prevail in the Delaware Court of Chancery.”

Twitter sued the Tesla billionaire in Delaware court in an attempt to force him to complete the deal.

The 62-page lawsuit, sprinkled with memes, tweets and a poop emoji, effectively highlighted the bizarre spectacle of the deal from the start. The company paints Musk as a non-serious potential owner — alleging at one point that he has “disdain” for the company, and at another saying, “Musk’s strategy is … a model of bad faith” — while seeking to compel him to become its owner. (Twitter’s board has an obligation to its shareholders to try to see the deal through if they believe it is in their best interest. The dispute could also end in a settlement.)

Twitter’s lawsuit against Musk over his move to terminate their $44 billion acquisition agreement will go to trial on Oct. 17 and run for five days, a Delaware judge ruled.

The decision came after Judge Kathaleen St. Jude McCormick, who is overseeing the case, previously ruled in Twitter’s favor that the proceedings could be expedited and take place in October. Twitter initially pushed for an October 10th start.

Musk’s legal team had asked for the trial to take place in 2023. Twitter’s legal team argued it was necessary to expedite the case in order to limit the “harm” to its business and to ensure the deal can be completed before Oct. 24, the “drop dead” date by which the two sides had previously agreed to close the deal.

Twitter whistleblower Peiter “Mudge” Zatko testifies before Congress in his first public appearance after his bombshell allegations against the social media company were reported in August by CNN and The Washington Post.

In a whistleblower disclosure sent to multiple lawmakers and government agencies in July, Zatko accused Twitter of failing to safeguard users’ personal information and of exposing the most sensitive parts of its operation to too many people, including potentially to foreign spies. Zatko — who was Twitter’s head of security from November 2020 until he was fired in January — also alleged company executives, including CEO Parag Agrawal, have deliberately misled regulators and the company’s own board about its shortcomings.

Zatko claimed in his testimony that Twitter is extremely vulnerable to being penetrated and exploited by agents of foreign governments, as well as detailed some of the personal information Twitter collects on users and alleged that the company does not know where the majority of its collected data goes.

Days earlier, a judge allowed Musk’s legal team to add arguments based on the whistleblower disclosure to its case.

Musk sends a letter to Twitter proposing to complete the deal as originally signed for $54.20 per share, citing people familiar with the negotiations. News of the letter, revealed in a security filing the next day, sends Twitter stock surging more than 20%, approaching the deal price for the first time in months.

Such an agreement could bring to an end a contentious, months-long back and forth between Musk and Twitter that has caused massive uncertainty for employees, investors and users of one of the world’s most influential social media platforms.

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October 9, 2022
Credit Union 1 and the Golic Family Foundation Announce Partnership and Plan to Distribute $100,000 in Grants to Local Nonprofits in 2023

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CU1 and former NFL player and veteran sportscaster Mike Golic will launch the partnership at the Shamrock Series presented by Credit Union 1 and invite local nonprofits in South Bend, Michiana, and Chicagoland to apply for grants.

Press Release
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Oct 8, 2022

SOUTH BEND, Ind., October 8, 2022 (Newswire.com)
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Credit Union 1 (CU1)—a leading financial institution with branches across Illinois, Indiana, and Nevada, and the Official Banking Partner of Notre Dame Athletics—is announcing its partnership with the Golic Family Foundation, a charitable organization started by notable Notre Dame alumnus, former NFL player and veteran sportscaster Mike Golic and his family. Together, CU1 and the Golic Family Foundation plan to offer $100,000 in grants to local nonprofits serving the South Bend community and beyond in 2023.

The partnership builds upon the success of the inaugural Golic Sub-Par Classic at The University of Notre Dame, held in June 2022. Credit Union 1 was the primary sponsor for the event, which benefited The Logan Center, Center for the Homeless, Food Bank of Northern Indiana and the South Bend Animal Resource Center.

“South Bend will always be home to our family thanks to the countless memories and milestones we have celebrated here, and we look forward to giving back to the community that helped shape us all,” says Golic. “Through the Golic Family Foundation, which will expand on the success of the inaugural Sub-Par Classic, we will raise money for causes near to our heart, and we are excited that this partnership with Credit Union 1 will allow us to give back in an even bigger way.”

In addition to the $100,000 of grants that will be distributed, Credit Union 1 also plans to donate $200 to the Golic Family Foundation each time a new member opens a Fighting Irish Program account, allowing members to participate in giving back to the community.

“In our 65-year history, Credit Union 1 has always been committed to supporting families and communities. As we expand into the South Bend community with our new branch located just minutes from the University of Notre Dame campus, we wanted to ensure that our presence went beyond just serving our local members,” says Todd Gunderson, President and CEO of Credit Union 1. “The partnership with the Golic Family Foundation was a natural fit, and we look forward to strengthening our ties with the residents of South Bend and the wonderful nonprofits that serve the community.”

Grants will be distributed throughout 2023, but interested organizations can learn more and submit an application now at creditunion1.org/golic.

About Credit Union 1

Credit Union 1 is celebrating 65 years of helping members reach their financial goals. CU1 is a member-owned, not-for-profit financial cooperative serving 85,000 members across 14 branches located in Illinois, Indiana, and Nevada. CU1 also serves members nationwide thanks to a highly rated mobile app, 30,000 surcharge-free ATMs, and 5,000 shared-branch locations. CU1’s mission is to exceed our members’ expectations by delivering innovative financial solutions to help achieve their maximum economic potential. In 2021, CU1 provided $9.9 million in direct financial benefits to members through lower loan rates, high savings rates, and fewer fees than banking institutions.

Source: Credit Union 1

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October 8, 2022
How meltdown in a $1 trillion market brought the UK to the brink of a financial crisis | CNN Business

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London
CNN Business
—

Pension funds are designed to be dull. Their singular goal — earning enough money to make payouts to retirees — favors cool heads over brash risk takers.

But as markets in the United Kingdom went haywire last week, hundreds of British pension fund managers found themselves at the center of a crisis that forced the Bank of England to step in to restore stability and avert a broader financial meltdown.

All it took was one big shock. Following finance minister Kwasi Kwarteng’s announcement on Friday, Sept. 23 of plans to ramp up borrowing to pay for tax cuts, investors dumped the pound and UK government bonds, sending yields on some of that debt soaring at the fastest rate on record.

The scale of the tumult put enormous pressure on many pension funds by upending an investing strategy that involves the use of derivatives to hedge their bets.

As the price of government bonds crashed, the funds were asked to pony up billions of pounds in collateral. In a scramble for cash, investment managers were forced to sell whatever they could — including, in some cases, more government bonds. That sent yields even higher, sparking another wave of collateral calls.

“It started to feed itself,” said Ben Gold, head of investment at XPS Pensions Group, a UK pensions consultancy. “Everyone was looking to sell and there was no buyer.”

The Bank of England went into crisis mode. After working through the night of Tuesday, Sept. 27, it stepped into the market the next day with a pledge to buy up to £65 billion ($73 billion) in bonds if needed. That stopped the bleeding and averted what the central bank later told lawmakers was its worst fear: a “self-reinforcing spiral” and “widespread financial instability.”

In a letter to the head of the UK Parliament’s Treasury Committee this week, the Bank of England said that if it hadn’t interceded, a number of funds would have defaulted, amplifying the strain on the financial system. It said its intervention was essential to “restore core market functioning.”

Pension funds are now racing to raise money to refill their coffers. Yet there are questions about whether they can find their footing before the Bank of England’s emergency bond-buying is due to end on Oct. 14. And for a wider range of investors, the near-miss is a wake-up call.

For the first time in decades, interest rates are rising quickly around the world. In that climate, markets are prone to accidents.

“What the previous two weeks have told you is there can be a lot more volatility in markets,” said Barry Kenneth, chief investment officer at the Pension Protection Fund, which manages pensions for employees of UK companies that become insolvent. “It’s easy to invest when everything’s going up. It’s a lot more difficult to invest when you’re trying to catch a falling knife, or you’ve got to readjust to a new environment.”

The first signs of trouble appeared among fund managers who focus on so-called “liability-driven investment,” or LDI, for pensions. Gold said he started to receive messages from worried clients over the weekend of Sept. 24-25.

LDI is built on a straightforward premise: Pensions need enough money to pay what they owe retirees well into the future. To plan for payouts in 30 or 50 years, they buy long-dated bonds, while purchasing derivatives to hedge these bets. In the process, they have to put up collateral. If bond yields rise sharply, they are asked to put up even more collateral in what’s known as a “margin call.” This obscure corner of the market has grown rapidly in recent years, reaching a valuation of more £1 trillion ($1.1 trillion), according to the Bank of England.

When bond yields rise slowly over time, it’s not a problem for pensions deploying LDI strategies, and actually helps their finances. But if bond yields shoot up very quickly, it’s a recipe for trouble. According to the Bank of England, the move in bond yields before it intervened was “unprecedented.” The four-day move in 30-year UK government bonds was more than twice what was seen during the highest-stress period of the pandemic.

“The sharpness and the viciousness of the move is what really caught people out,” Kenneth said.

The margin calls came in — and kept coming. The Pension Protection Fund said it faced a £1.6 billion call for cash. It was able to pay without dumping assets, but others were caught off guard, and were forced into a fire sale of government bonds, corporate debt and stocks to raise money. Gold estimated that at least half of the 400 pension programs that XPS advises faced collateral calls, and that across the industry, funds are now looking to fill a hole of between £100 billion and £150 billion.

“When you push such large moves through the financial system, it makes sense that something would break,” said Rohan Khanna, a strategist at UBS.

When market dysfunction sparks a chain reaction, it’s not just scary for investors. The Bank of England made clear in its letter that the bond market rout “may have led to an excessive and sudden tightening of financing conditions for the real economy” as borrowing costs skyrocketed. For many businesses and mortgage holders, they already have.

So far, the Bank of England has only bought £3.8 billion in bonds, far less than it could have purchased. Still, the effort has sent a strong signal. Yields on longer-term bonds have dropped sharply, giving pension funds time to recoup — though they’ve recently started to rise again.

“What the Bank of England has done is bought time for some of my peers out there,” Kenneth said.

Still, Kenneth is concerned that if the program ends next week as scheduled, the task won’t be complete given the complexity of many pension funds. Daniela Russell, head of UK rates strategy at HSBC, warned in a recent note to clients that there’s a risk of a “cliff-edge,” especially since the Bank of England is moving ahead with previous plans to start selling bonds it bought during the pandemic at the end of the month.

“It might be hoped that the precedent of BoE intervention continues to provide a backstop beyond this date, but this may not be sufficient to prevent a renewed vigorous sell-off in long-dated gilts,” she wrote.

As central banks jack up interest rates at the fastest clip in decades, investors are nervous about the implications for their portfolios and for the economy. They’re holding more cash, which makes it harder to execute trades and can exacerbate jarring price moves.

That makes a surprise event more likely to cause massive disruption, and the specter of the next shocker looms. Will it be a rough batch of economic data? Trouble at a global bank? Another political misstep in the United Kingdom?

Gold said the pension industry as a whole is better prepared now, though he concedes it would be “naive” to think there couldn’t be another bout of instability.

“You would need to see yields rise more quickly than we saw this time,” he said, noting the larger buffers funds are now amassing. “It would require something of absolutely historic proportions for that not to be enough, but you never know.”

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October 8, 2022
Biden’s student loan forgiveness application is coming soon. Here’s what you need to know | CNN Politics

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Washington
CNN
—

The application for President Joe Biden’s student loan forgiveness plan is expected to go live as soon as this week.

Announced in late August, the plan will deliver federal student loan forgiveness to millions of low- and middle-income borrowers.

Individuals who earned less than $125,000 in either 2020 or 2021 and married couples or heads of households who made less than $250,000 annually in those years will see up to $10,000 of their federal student loan debt forgiven.

If a qualifying borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 of debt forgiveness.

In addition to federal Direct Loans used to pay for an undergraduate degree, federal PLUS loans borrowed by graduate students and parents may also be eligible if the borrower meets the income requirements.

Facing mounting legal challenges to the student loan forgiveness policy, the Biden administration announced some last-minute changes to the program last week. Borrowers are still awaiting final details on the policy.

The Department of Education regularly updates the Federal Student Aid website with information on the forgiveness program.

Here’s what we know so far:

The application has not been released yet but the Biden administration has said it will come out sometime in October.

The online application will be short, according to the Department of Education. Borrowers won’t need to upload any supporting documents or use their Federal Student Aid ID to submit the application.

“Once you submit your application, we’ll review it, determine your eligibility for debt relief and work with your loan servicer(s) to process your relief. We’ll contact you if we need any additional information from you,” the department said an email to borrowers last week.

Borrowers will have more than a year to apply. The deadline will be December 2023.

To be notified when the process has officially opened, sign up at the Department of Education subscription page.

About 8 million people are expected to receive student loan forgiveness automatically because the Department of Education already knows what their income is, likely due to previously submitted financial aid forms or income-driven repayment plan applications.

It’s unclear when exactly debts will be discharged. But due to ongoing lawsuits, the government has agreed in court to hold off canceling any federal student loan debt before October 17.

The Biden administration scaled back eligibility for the program last week, as it faces mounting legal challenges to the policy.

The program will now exclude borrowers whose federal student loans are guaranteed by the government but held by private lenders. The administration has said the change could affect about 700,000 people.

The Department of Education initially said these loans, many of which were made under the former Federal Family Education Loan program and Federal Perkins Loan program, would be eligible for the one-time forgiveness action as long as the borrower consolidated his or her debt into the federal Direct Loan program.

But the agency has reversed course after six Republican-led states sued the Biden administration, arguing that forgiving the privately held loans would financially hurt states and student loan servicers.

Now, privately held federal student loans must have been consolidated before September 29 in order to be eligible for the debt relief.

The White House clarified last week that borrowers will be able to opt out if they don’t want to receive the debt forgiveness.

The Biden administration’s announcement came hours after a borrower sued, arguing that he would be forced to pay state taxes on the amount canceled – an expense he would otherwise avoid.

There are a handful of states that may tax the debt discharged under Biden’s plan if state legislative or administrative changes are not made beforehand, according to the Tax Foundation.

There are currently at least three significant lawsuits aiming to block the Biden administration from implementing its student loan forgiveness plan.

Republican states are leading the charge. In addition to the lawsuit filed by six Republican-led states that say they could be hurt financially by the forgiveness plan, Arizona Attorney General Mark Brnovich also filed a lawsuit last week.

Brnovich, a Republican, argues that the policy could reduce Arizona’s tax revenue because the state code doesn’t consider the loan forgiveness as taxable income, according to the lawsuit. The complaint also argues that the forgiveness policy will hurt the attorney general office’s ability to recruit employees. Currently its employees may be eligible for the federal Public Service Loan Forgiveness program, but some potential job candidates may not view that as a benefit if their student loan debt is already canceled, the lawsuit argues.

A federal judge has already denied the request in the third lawsuit – from a borrower who sued arguing that they would incur a bigger state tax bill due to the loan forgiveness. The plaintiff, a public interest lawyer at the Pacific Legal Foundation, has until October 10 to file a revamped lawsuit.

The nonpartisan Congressional Budget Office said in a report released last week that the student loan cancellation could come at a price of $400 billion but noted that those estimates are still “highly uncertain.”

The Biden administration argues that the CBO’s cost estimate should be viewed over a 30-year time period and came out with its own analysis two days later. It said the program will cost an average of $30 billion per year over the next decade and $379 billion over the course of the program.

The Department of Education is warning borrowers of scams related to the student loan forgiveness program that ask for payment in return for help getting debt relief.

“Make sure you work only with the US Department of Education and our loan servicers, and never reveal your personal information or account password to anyone,” it said in an email to borrowers.

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October 7, 2022
Dow books 630-point drop after strong jobs data rattles investors, but stocks cement weekly gains
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U.S. stocks finished sharply lower Friday, but still booked their best weekly gains in a month, after September jobs data showed an unexpected fall in the unemployment rate that’s anticipated to reinforce the Federal Reserve’s resolve to keep tightening monetary policy.

Investors also weighed a profit warning at a leading microchip maker ahead of next week’s increase in quarterly earnings results.
What happened

The Dow Jones Industrial Average
DJIA,
-2.11%
fell 630.15 points, or 2.1%, ending at 29,296.79, but off the session low of 29,142.66.

The S&P 500
SPX,
-2.80%
dropped 104.86 points, or 2.8%, closing at 3,639.66.

The Nasdaq Composite
COMP,
-3.80%
shed 420.91 points, or 3.8%, to finish at 10,652.40.

Stocks posted back-to-back losses, trimming weekly gains, but recorded their best weekly gains since Sept. 9, according to Dow Jones Market Data.

Read: Will the stock market be open on Columbus Day?

What drove markets

Stocks recorded sharp losses Friday after the Labor Department said the U.S. economy added 263,000 jobs in September, while the unemployment rate declined to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%.

Still, a powerful rally earlier in the week boosted all three major stock indexes to weekly gains, a departure from three straight weekly losses, according to Dow Jones Market Data.

“It’s manic. We are all on edge,” said Kent Engelke, chief economic strategist at Capitol Securities Management, of the sharp market swings.

“Any piece of good news is a cause for an explosive rally,” Engelke said by phone. On the flip side, he pegged technology-based trading “in an illiquid and emotional market” as exacerbating Friday’s selloff.

“It’s a reflection that people have re-entered the mind-set that the Fed is going to be raising rates at a rapid clip, probably for longer than what they might have suspected at the start of the week,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, by phone.

Pavlik expects the Fed to keep tightening financial conditions to try to head off inflation. “But once we turn the corner, and the economy slows down, the Fed probably will be more aggressive in cutting rates on the way down.”

In addition, the Fed has been “draining liquidity from the system at a remarkable pace,” wrote Rick Rieder, BlackRock’s chief investment officer of global fixed income, in a Friday client note, while pointing to an astounding $1.3 trillion decline in the central bank’s balance sheet since the December 2021 peak.

Pavlik at Dakota Wealth said he anticipates the Fed will start slowing interest rate hikes by mid-next year, which likely means continued pressure for the stock market, particularly with a backdrop of big oil-price
CL00,
+5.37%
gains this week after global crude producers voted to cut monthly production and with the U.S. dollar’s
DXY,
+0.44%
surge this year against a basket of rival currencies.

U.S. crude oil prices climbed for a fifth day in a row on Friday to settle at $92.64 a barrel, while booking at 16.5% weekly gain.

New York Fed President John Williams said Friday that benchmark interest rates likely need to hit 4.5% over time. The Fed’s policy rate now sits in a 3%-3.25% range, up from a zero-0.25% range a year ago.

The benchmark 10-year Treasury rate
TMUBMUSD10Y,
3.889%
climbed to 3.883% Friday, as the key metric used to gauge the affordability of credit for businesses, household and the economy posted 10 straight weeks of gains, according to Dow Jones Market Data.

Read: Bond markets facing historic losses grow anxious of Fed that ‘isn’t blinking yet’

Investors continued to hope for relief on the inflation front and will be monitoring next week’s release of the September consumer-price index, as well as corporate earnings season as it picks up.

Companies in focus

Twitter Inc.
TWTR,
-0.43%
shares fell 0.4% Friday after a judge delayed a looming trial between the company and Elon Musk to allow the Tesla Inc.
TSLA,
-6.32%
CEO more time to close his $44 billion acquisition of the social media platform.

Besides the jobs report, investors weighed a profit warning from microchip maker Advanced Micro Devices Inc. AMD, which said the PC market weakened significantly during the quarter. AMD shares fell 13.9%, and rivals including Nvidia Corp. NVDA and Intel Corp. INTC also closed lower.

U.S. cannabis stocks were choppy Friday, with the AdvisorShares Pure US Cannabis ETF
MSOS,
-2.80%
ending lower, following steep gains earlier in the week after President Joe Biden said the U.S. would consider de-scheduling cannabis from its current position as a Schedule 1 narcotic under federal law.

—Steven Goldstein contributed reporting to this article
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October 7, 2022
Will the stock market be open on Columbus Day?

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It’s a regular day of business for the U.S. stock market on Monday, October 10, as equity exchanges stay open for Columbus Day, a federal holiday that also has been recognized as Indigenous Peoples’ Day.

Bond markets, however, take the day off, which means a long weekend for the Treasury market, corporate bonds and other forms of tradable debt, starting after the close of business on Friday.

Stocks have endured a brutal selloff in the first nine months of the year as the Federal Reserve has worked to fight inflation that’s been stuck near it highest levels since the early 1980s.

The central bank’s main tool to battle inflation has been to dramatically increase interest rates, while also shrinking its balance sheet, in an effort to tighten financial conditions and squelch demand for goods and services, while also bringing down stubbornly high costs of living, including food, shelter and energy prices.

The Fed’s focus in recent months also has been on cooling the roaring labor market, with strong wage gains in the past year viewed as one of several culprits behind elevated inflation.

Friday’s jobs report for September pegged the unemployment rate as matching a prepandemic low of 3.5%, dashing hopes for now of a significant trend toward a pullback in the labor market.

The S&P 500 index
SPX,
-3.03%
tumbled 1.9% on Friday, the Dow Jones Industrial Average
DJIA,
-2.39%
was down 1.5% and the Nasdaq Composite Index
COMP,
-3.89%
was off 2.6%. And early October rally had offered some hope for a bounce for stocks, after a brutal first nine months for investors.

Bonds also have undergone a painful repricing this year as volatility tied to the Fed’s monetary tightening campaign has eroded the value of bonds issued in the past decade of low rates.

The S&P 500 is down about 23% for the year, the Dow off 19% and the Nasdaq off 31% since January. The 10-year Treasury rate
TMUBMUSD10Y,
3.884%
was near 3.9% Friday, after recently touching 4%, it’s highest since 2010

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October 7, 2022
Credit Suisse makes $2.98 billion debt-repurchase offers

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Credit Suisse Group AG said Friday that it is offering to repurchase debt securities for a total of close to $3 billion as the troubled lender looks to manage its liabilities ahead of a touted restructuring.

The Swiss bank
CS,
+1.66%

CSGN,
+3.13%
is offering to buy back eight euro- or pound sterling-denominated senior debt securities for a total of up to 1 billion euros ($979.2 million,) it said.

It is also offering to buy back 12 U.S. dollar-denominated securities for up to $2 billion. Both offers are subject to various conditions and will expire on Nov. 3 and Nov. 10, respectively, Credit Suisse said.

The value of some Credit Suisse bonds fell at the beginning of this week alongside shares in the lender amid speculation over its financial health. The bank has moved to reassure investors ahead of a planned strategy update due on Oct. 27 alongside quarterly results.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

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October 6, 2022
White House left looking for answers after OPEC+ announces oil production cuts | CNN Politics

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CNN
—

The OPEC+ decision to dramatically cut its oil output targets has left the White House grappling with a complex – and potentially damaging – mix of geopolitical and domestic challenges with few easy answers.

President Joe Biden now faces the reality that an already complex and tenuous bilateral relationship with Saudi Arabia has deeply fractured, the Western effort to isolate and shrink Russia’s war effort has taken a direct hit and the US economy and political picture have both grown more fragile.

“Disappointment. We’re looking at what alternatives we may have” to bring down oil prices, Biden told reporters when asked his reaction to the OPEC+ news.

“There’s a lot of alternatives. We haven’t made up our mind yet,” he added.

Biden’s advisers are now re-doubling efforts to find policy and diplomatic options to address the unwelcome surprise.

“We’re going to work to identify the tools that we have to ensure that organizations like OPEC that assign quotas to their members of how much to produce are not – have a muted and less of an impact on American consumers, and quite frankly, on the global economy,” Amos Hochstein, Biden’s top energy envoy, told Bianna Golodryga on CNN’s “New Day” Thursday.

The full scale of the fallout from Saudi Arabia-led oil cartel’s decision may not be apparent for months or longer, officials say. But they are also keenly aware just how many acutely important elements of the administration’s foreign and domestic agenda the production cut spills directly into.

Biden administration officials acknowledge they’re in a very difficult position over their relationship with Saudi Arabia.

Secretary of State Antony Blinken called OPEC’s move to cut oil production both “shortsighted and disappointing,” and said the administration is reviewing a “number of response options” when it comes to US-Saudi relations.

“We will not do anything that would infringe on our interests, that’s first and foremost, what will guide us,” Blinken said during a news conference in Peru on Thursday. “We will keep all of those interests in mind and consult closely with all of the relevant stakeholders as we decide on any steps going forward.”

There is clearly a tacit effort underway to evaluate ways to respond to the OPEC+ decision to cut back oil production by 2 million barrels per day. But as has been laid bare repeatedly over the course of Biden’s time in office, the power dynamics between the US and the Kingdom of Saudi Arabia are simply in a different place now than at any earlier point due to the economic and energy pressures tied to Russia’s invasion.

Crown Prince Mohammed bin Salman has made abundantly clear he feels no need to be the junior actor, and his overt and explicit moves toward China and Russia have ensured there is no subtlety in his approach.

On a purely oil market basis, the Saudis prize stability over anything else – stability the OPEC+ configuration has provided after damaging price wars and the volatility of the pandemic. Moscow, of course, is the key player in that configuration and it’s notable that beneath the output cut, an extension of the OPEC+ arrangement was also approved on Wednesday.

Still, while administration officials always viewed Biden’s trip to Jeddah – which resulted in the diplomatic fist bump seen around the world – as a critical regional security move, the cartel’s willingness to move in ways so obviously detrimental to US interests has reverberated across the administration. Biden again defended the trip Thursday, saying, “The trip was not essentially for oil. The trip was about the Middle East and about Israel and rationalization of positions.”

“It’s not always about us, we get it,” one US official said. “But they’re just as aware of the perceptions and implications of this move as we are.”

The most obvious lever for the US to pull is security related – it’s far and away the biggest leverage point. But the ramifications of any moves on that front are much broader than the bilateral relationship, officials note, and would directly undercut more than a year of intensive work to establish a coherent regional security posture.

White House press secretary Karine Jean-Pierre’s statement on Wednesday that it “is clear OPEC+ is aligning with Russia” and its war effort was as intentional as it was blunt. Hochstein, in his CNN interview, reiterated that the OPEC+ decision was a “huge mistake” and “the wrong thing to do” amid Russia’s ongoing war in Ukraine and high energy prices, saying that Russia and Saudi Arabia are “working together.”

US officials had previously been cautious about directly criticizing the obvious dance Saudi Arabia and others in the region have conducted with Moscow. That posture is gone.

Biden administration officials, according to people with knowledge, made very clear to the Saudis in the days leading up the move that US rhetoric would change dramatically and they would open the door to new options to respond to a major cut. The specifics of those options were left somewhat ambiguous intentionally. But the warning was there.

One notable line in the White House statement issued Wednesday by National Economic Council Director Brian Deese and national security adviser Jake Sullivan statement was the idea of working with Congress on legislation related to OPEC.

It’s a reference to a bill that would remove sovereign immunity from antitrust suits, opening the door for the US to sue cartel members. The White House has been cool to the idea due to the very real concern it would launch a price war with the market’s biggest players that would only serve to hurt US consumers. But just cracking the door open to looking at it is notable – and underscores the scale of the anger inside the West Wing.

The legislative reference underscores a key piece how the response will play out in the weeks ahead – the White House has made its statement, which – in a world of cautious diplo-speak – was sharply critical. Now officials have said they are perfectly comfortable letting congressional Democrats rail on the Saudis on their behalf, something they expect to only escalate in the days ahead given the convergence of geopolitical and domestic political factors.

The blistering response from Capitol Hill has the potential to create some the kind of pressure that could create space to pursue actions the administration has been wary of pursuing up to this point.

Connecticut Democratic Sen. Chris Murphy, for instance, tweeted, “I thought the whole point of selling arms to the Gulf States despite their human rights abuses, nonsensical Yemen War, working against US interests in Libya, Sudan, etc, was that when an international crisis came, the Gulf could choose America over Russia/China.”

The biggest focus for the White House now on oil is on the domestic front. Biden’s top energy and economic advisers met privately with oil executives last week and discussions between officials and industry players have continued this week. Another meeting is likely soon as they continue to search for options to boost US production.

While several options have been floated – including some that infuriate the industry, like potential curbs on exports – it remains unclear whether the White House is ready to move forward on any of them.

A question being weighed now is if OPEC+’s decision changes that dynamic at all in a relationship between the White House and industry that has ping-ponged between clear animosity to cooler heads prevailing and back toward palpable tension over the course of the last several months.

The White House rhetorical reversal hinting at the potential for new Strategic Petroleum Reserve releases, a complete 180-degree turn in less than 24 hours, was notable even if it didn’t signal anything concrete.

What it did signal, however, was a clear message to markets that the option was, in fact, on the table.

Blinken on Thursday once again highlighted what the administration has done to boost oil production in the US.

“We’ve taken a number of steps over the last months to try and ensure that that’s the case, including releasing oil from the Strategic Petroleum Reserve, increasing significantly our production. Oil production is up in the United States by about 500,000 barrels a day,” he said.

Blinken also added that the administration is “looking at other steps that we can take to ensure that there is adequate supply to meet to meet global demand.”

The final release of 10 million from Biden’s announced 180 million barrel release over six months is still scheduled for November, even though the actual total barrels released will fall under the full amount Biden initially targeted. Cracking the door open on additional releases was an effort to signal there is a view inside the White House that there are still metaphorical bullets in the chamber if they need them.

One key point to remember amid the hand-wringing: Predictions of specific price increases at the pump are a fool’s errand.

“I believe it will have less of an impact in the United States and far more of an impact on lower-income countries around the world,” Hochstein said.

The market has been pricing in the output cut for several days. A key element of the output cut is that nearly all OPEC+ members have been missing their production targets for months. So “2 million barrels per day” is actually far less than that from a production basis.

In other words, there are a myriad of factors that drive retail prices – such as in California, where soaring gas prices over the last two weeks were in large part due to a mess of refinery issues – and no single answer to the range of new complications White House officials are now facing.

Biden’s message, behind his disappointment with the production cut, was clear cut, according to Hochstein.

“The President is still instructing us to work, to do whatever we can,” he said.

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October 6, 2022
Evolve Bank & Trust to Be Presenting Sponsor of Dixon Gallery’s ‘Art on Fire’

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Press Release
–

Oct 6, 2022

MEMPHIS, Tenn., October 6, 2022 (Newswire.com)
–
Evolve Bank & Trust (“Evolve”), a leading financial technology solutions provider, is proud to be the presenting sponsor for “Art on Fire,” benefitting the Dixon Gallery & Gardens (“Dixon”), in Memphis, TN.

Evolve has been a proud supporter of the Dixon for several years. Situated in East Memphis, the Dixon Gallery & Gardens provides art and horticulture educational opportunities for local children of all ages. It is also a world-class art gallery with stunning gardens. The “Art on Fire” event is the single largest fundraising event of the year for the Dixon.

“Being a good neighbor means being involved in the communities we serve. The Dixon is an incredible place to visit and serves the community through art education. Evolve is proud to be a small part in keeping art alive in the Mid-South,” said Scott Stafford, CEO, Evolve Bank & Trust.

“Evolve Bank has been a generous supporter of the Dixon’s education and outreach programs for many years. They are a committed partner, and they help make it possible for Art on Fire to deliver thousands of experiences in the arts and horticulture to people of all ages in our community,” noted Kevin Sharp, Director of the Dixon Gallery and Gardens.

Art on Fire will also feature food from local restaurants, art to buy, and a roaring bonfire. The event supports the Dixon’s art and horticulture programs which include dozens of community outreach programs for over 100,000 people each year. The event will be held Oct. 22, 2022.

Tickets are on sale via the Dixon’s website; Dixon.org/artonfire.

About Evolve Bank & Trust:

Evolve Bank & Trust, a technology focused financial services organization and Banking-as-a-Service (“BaaS”) provider, is a best-in-class financial institution offering specialized services in Open Banking, Personal and Business Banking, Mortgage, SBA Lending, Physicians Capital, Community Funding and Trust. Evolve is recognized as a global leader in the payments industry delivering ACH, Debit/Credit Sponsorship, Card Issuance and unique technology strategies to clients around the world. Evolve has been voted a Top Workplace USA and has been named in Inc. Magazine’s 5000 List of the fastest-growing private companies.

Source: Evolve Bank & Trust

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October 6, 2022
Mortgage rates take a breather after rising for several weeks in a row | CNN Business

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After rising for six weeks in a row, mortgage rates retreated last week.

The 30-year fixed-rate mortgage averaged 6.66% in the week ending October 5, down from 6.70% the week before, according to Freddie Mac.

Mortgage rates have more than doubled since the start of this year as the Federal Reserve continues its unprecedented campaign of hiking interest rates in order to tame soaring inflation. But uncertainty about the possibility of a recession and the impact of rate hikes on the economy have made mortgage rates more volatile.

“Mortgage rates decreased slightly this week due to ongoing economic uncertainty,” said Sam Khater, Freddie Mac’s chief economist. “However, rates remain quite high compared to just one year ago, meaning housing continues to be more expensive for potential homebuyers.”

The average mortgage rate is based on a survey of conventional home purchase loans for borrowers who put 20% down and have excellent credit, according to Freddie Mac. But many buyers who put down less money upfront or have less than perfect credit will pay more.

Investors and analysts have been scrutinizing each piece of economic data, searching for clues about the Fed’s next steps and the future of the US and global economies, said Danielle Hale, Realtor.com’s chief economist.

The Fed does not set the interest rates borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds. As investors see or anticipate rate hikes, they often sell government bonds, which sends yields higher and mortgage rates rise.

Over the past month, yields on 10-year Treasuries soared from 3.25% to nearly 4% before falling back around 3.75% this week.

Hale likened investors’ actions to a driver navigating a road in dense fog, prone to over-correcting at each turn.

“Signs that we are closer to the end of the tightening cycle – such as a surprisingly steep decline in job openings – tend to cause rates to slip, while rates bounce higher on signals like robust activity in the services sector,” Hale said.

Even though rates dipped slightly this week, the average interest rate for a 30-year, fixed-rate loan is still more than double what it was at this time last year.

A year ago, a buyer who put 20% down on a $390,000 home and financed the rest with a 30-year, fixed-rate mortgage at an average interest rate of 2.99% had a monthly mortgage payment of $1,314, according to calculations from Freddie Mac.

Today, a homeowner buying the same-priced house with an average rate of 6.66% would pay $2,005 a month in principal and interest. That’s $691 more each month.

As rates have been rising over the last several weeks, fewer people have been applying for mortgages said Bob Broeksmit, president and CEO of the Mortgage Bankers Association.

Ongoing economic uncertainty together with Hurricane Ian’s devastation in Florida resulted in a 14% decline in mortgage applications last week from the week before, he said.

MBA also found that an increasing number of borrowers are applying for adjustable rate mortgages, or ARMs. Applications for ARMs climbed to nearly 12% of all applications last week.

The average rate for the ARM tracked by Freddie Mac (a 5-year Treasury-indexed hybrid ARM) was 5.36%, more than a percentage point lower than the 30-year fixed rate.

“While rate increases are needed to tame inflation and alleviate the burden it places on household budgets, higher borrowing costs have caused consumers to think twice about major purchases like homes and cars,” said Hale.

With more prospective buyers sitting on the sidelines, those still looking to buy have a little more breathing room.

Correction: “Today’s home shoppers have more choices, but for many, the increased cost of financing and higher home prices mean fewer affordable options,” Hale said. “As challenging as it may be to set and stick to a budget in this environment of rising prices and rates, it’s more important than ever to do so.”
A previous version of this story misstated the number of weeks mortgage rates have been rising. Rates rose for six consecutive weeks before falling this week.

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October 6, 2022
The bond market is crumbling. That’s bad for Wall Street and Main Street | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

New York
CNN Business
—

The global bond market is having a historically awful year.

The yield on the 10-year US Treasury bond, a proxy for borrowing costs, briefly moved above 4% on Wednesday for the first time in 12 years. That’s a bad omen for Wall Street and Main Street.

What’s happening: This hasn’t been a pretty year for US stocks. All three major indexes are in a bear market, down more than 20% from recent highs, and analysts predict more pain ahead. When things are this bad, investors seek safety in Treasury bonds, which have low returns but are also considered low-risk (As loans to the US government, Treasury notes are seen as a safe bet since there is little risk they won’t be paid back).

But in 2022’s topsy-turvy economy, even that safe haven has become somewhat treacherous.

Bond returns, or yields, rise as their prices fall. Under normal market conditions, a rising yield should mean that there’s less demand for bonds because investors would rather put their money into higher-risk (and higher-reward) stocks.

Instead markets are plummeting, and investors are flocking out of risky stocks, but yields are going up. What gives?

Blame the Fed. Persistent inflation has led the Federal Reserve to fight back by aggressively hiking interest rates, and as a result the yields on US Treasury bonds have soared.

Economic turmoil in the United Kingdom and European Union has also caused the value of both the British pound and the euro to fall dramatically when compared to the US dollar. Dollar strength typically coincides with higher bond rates as well.

So while we’d normally see a rising 10-year yield as a signal that US investors have a rosy economic outlook, that isn’t the case this time. Gloomy investors are predicting more interest rate hikes and a higher chance of recession.

What it means: Portfolios are aching. Vanguard’s $514.5 billion Total Bond Market Index, the largest US bond fund, is down more than 15% so far this year. That puts it on track for its worst year since it was created in 1986. The iShares 20+ Year Treasury bond fund

(TLT) (TLT) is down nearly 30% for the year.

Stock investors are also nervously eyeing Treasuries. High yields make it more expensive for companies to borrow money, and that extra cost could lower earnings expectations. Companies with significant debt levels may not be able to afford higher financing costs at all.

Main Street doesn’t get a break, either. An elevated 10-year Treasury return means more expensive loans on cars, credit cards and even student debt. It also means higher mortgage rates: The spike has already helped push the average rate for a 30-year mortgage above 6% for the first time since 2008.

Going deeper: Still, investors are more nervous about the immediate future than the longer term. That’s spurred an inverted yield curve – when interest rates on short-term bonds move higher than those on long-term bonds. The inverted yield curve is a particularly ominous warning sign that has correctly predicted almost every recession over the past 60 years.

The curve first inverted in April, and then again this summer. The two-year treasury yield has soared in the last week, and now hovers above 4.3%, deepening that gap.

On Monday, a team at BNP Paribas predicted that the inverted gap between the two-year and 10-year Treasury yields could grow to its largest level since the early 1980s. Those years were marked by sticky inflation, interest rates near 20% and a very deep recession.

What’s next: The bond market may face fresh volatility on Friday with the release of the Federal Reserve’s favored inflation measure, the Personal Consumption Expenditure Price Index for August. If the report comes in above expectations, expect bond yields to move even higher.

The Bank of England held an emergency intervention to maintain economic stability in the UK on Wednesday. The central bank said it would buy long-dated UK government bonds “on whatever scale is necessary” to prevent a market crash.

Investors around the globe have been dumping the British pound and UK bonds since the government on Friday unveiled a huge package of tax cuts, spending and increased borrowing aimed at getting the economy moving and protecting households and businesses from sky-high energy bills this winter, reports my colleague Mark Thompson.

Markets fear the plan will drive up already persistent inflation, forcing the Bank of England to push interest rates as high as 6% next spring, from 2.25% at present. Mortgage markets have been in turmoil all week as lenders have struggled to price their loans. Hundreds of products have been withdrawn.

“This repricing [of UK assets] has become more significant in the past day — and it is particularly affecting long-dated UK government debt,” the central bank said in its statement.

“Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

Many final salary, or defined-benefit, pension funds were particularly exposed to the dramatic sell-off in longer dated UK government bonds.

“They would have been wiped out,” said Kerrin Rosenberg, UK chief executive of Cardano Investment.

The central bank said it would buy long-dated UK government bonds until October 14.

Steep drops in bond prices may be signaling doom and gloom for the economy, but some analysts say short-term bonds are still looking more attractive than equities right now.

“Record low yields have kept fixed income in the shadow of equities for decades,” said analysts at BNY Mellon Wealth Management in a research note. “But the aggressive shift in Fed policy is beginning to change this.”

Central banks around the globe have responded to elevated inflation by hiking interest rates– and bond yields have increased alongside them. The two-year US Treasury bond is currently yielding nearly 4%. That’s still a relatively low return, but better than the S&P 500’s dividend yield of around 1.7%.

“For the first time in several years, bonds are attractive investment options. In addition to providing diversification versus equities…you now get paid for owning them,” wrote Barry Ritholtz of Ritholtz Wealth Management on Wednesday.

Consider the alternative: the S&P is down more than 20% year to date.

The US Bureau of Economic Analysis releases its third estimate for Q2 GDP and US weekly jobless claims.

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October 5, 2022
White House says Biden’s Saudi trip wasn’t a waste as he lambastes OPEC+’s ‘shortsighted’ decision to cut oil output | CNN Politics

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CNN
—

President Joe Biden is “disappointed” the Saudi-led OPEC+ oil cartel agreed to cut output by 2 million barrels per day, the White House said Wednesday, as the threat of rising gas prices looms weeks ahead of critical midterm elections.

The decision by the grouping of major oil producers rebuffed heavy lobbying from US administration officials and prompted Biden to say he was concerned about the move. It reversed a small increase in output OPEC+ announced shortly after Biden visited Saudi Arabia for a conference in July.

Still, the White House insisted that visit was not a “waste of time,” even as it sharply criticized the decision to cut production.

“The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine,” said two of Biden’s top aides, national security adviser Jake Sullivan and National Economic Council Director Brian Deese, in a statement.

“At a time when maintaining a global supply of energy is of paramount importance, this decision will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices,” the two advisers wrote.

The administration will “consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” the statement read, without specifying which actions are under consideration dampen the oil cartel’s sway.

Slashing oil production just ahead of November’s midterm elections poses a potential political problem for the President, who has touted this summer’s decreasing gas prices as he works to promote his agenda. The average gas price has been rising nationally again in recent days, according to AAA.

Earlier this year, Biden announced a major release of barrels from the Strategic Petroleum Reserve in an effort to alleviate pump prices. On Tuesday, the White House said it was not considering additional releases beyond the 180 million previously announced.

But after OPEC+ announced its decision on Wednesday, the White House said Biden would “continue to direct SPR releases as necessary,” apparently cracking open the door again to potential releases.

Departing the White House on Wednesday, Biden said he was concerned about the possibility of a significant cut to production.

“I need to see what the detail is. I am concerned, it is unnecessary,” he said in response to a question about the OPEC+ decision as he departed the White House for Florida, where he was set to tour storm damage.

The international cartel of oil producers held a critical meeting Wednesday, where energy ministers decided to slash production by 2 million barrels per day, the biggest cut since the start of the pandemic.

For the past several days, Biden’s senior-most energy, economic and foreign policy officials had been lobbying their foreign counterparts in Middle Eastern allied countries including Kuwait, Saudi Arabia and the United Arab Emirates to vote against cutting oil production.

When he visited Saudi Arabia in July, Biden sought to make clear it wasn’t solely to ask the oil-rich kingdom to increase its oil output. After decrying the regime’s human rights record as a candidate, Biden fist-bumped the powerful Crown Prince Mohammed bin Salman, who US intelligence has said masterminded the murder of Saudi journalist and US resident Jamal Khashoggi.

Speaking on Fox News shortly after the decision was announced, National Security Council communications coordinator John Kirby said the oil cartel was “adjusting back their numbers down a little bit” after making a small increase after Biden’s visit.

“OPEC+ has been saying and telling the word they’re actually producing 3.5 million more barrels than they actually are. So in some ways this announced decrease really gets them back into more align with actual production,” Kirby said, noting there hadn’t yet been dramatic shifts in the price of oil.

“We have to see how it plays out over the long term,” he said.

Kirby said Biden’s visit to Jeddah, Saudi Arabia, for a regional conference “was not about oil.”

“It was about larger national strategic and national interest goals throughout the region to try to foster more integrated cooperative region,” he said.

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October 5, 2022
OPEC announces the biggest cut to oil production since the start of the pandemic | CNN Business

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London
CNN Business
—

OPEC+ said Wednesday that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.

The group of major oil producers, which includes Saudi Arabia and Russia, announced the production cut following its first meeting in person since March 2020. The reduction is equivalent to about 2% of global oil demand.

The price of Brent crude oil rose 1.5% to more than $93 a barrel on the news, adding to gains this week ahead of the gathering of oil ministers. US oil was up 1.7% at $88.

The Biden administration criticized the OPEC+ decision in a statement on Wednesday, calling it “shortsighted” and saying that it will hurt low and middle-income countries already struggling with elevated energy prices the most.

The production cuts will start in November, and the Organization of Petroleum Exporting Countries (OPEC) and its allies will meet again in December.

In a statement, the group said the decision to cut production was made “in light of the uncertainty that surrounds the global economic and oil market outlooks.”

Global oil prices, which soared in the first half of the year, have since dropped sharply on fears that a global recession will depress demand. Brent crude is down 20% since the end of June. The global benchmark hit a peak of $139 a barrel in March after Russia’s invasion of Ukraine.

OPEC and its allies, which control more than 40% of global oil production, are hoping to preempt a drop in demand for their barrels from a sharp economic slowdown in China, the United States and Europe.

Western sanctions on Russian oil are also muddying the waters. Russia’s production has held up better than predicted, with supply being diverted to China and India. But the United States and Europe are now working on ways to implement a G7 agreement to cap the price of Russian crude exports to third countries.

The oil cartel came under intense pressure from the White House ahead of its meeting in Vienna as President Biden tried to secure lower energy prices for US consumers. Senior Biden administration officials were lobbying their counterparts in Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) to vote against cutting oil production, according to officials.

The prospect of a production cut was framed as a “total disaster” in draft talking points circulated by the White House to the Treasury Department on Monday, which CNN obtained. “It’s important everyone is aware of just how high the stakes are,” one US official said.

With just a month to go before the critical midterm elections, US gasoline prices have begun to creep up again, posing a political risk the White House is desperately trying to avoid.

Rising oil prices could mean inflation remains higher for longer, and add to pressure on the Federal Reserve to hike interest rates even more aggressively.

But the impact of Wednesday’s cut, while a bullish signal for oil prices, may be limited as many smaller OPEC producers were struggling to meet previous production targets.

“An announced cut of any volume is unlikely to be fully implemented by all countries, as the group already lags 3 million barrels per day behind its stated production ceiling,” Rystad Energy analyst Jorge Leon said in a note.

Rystad Energy estimates that the global oil market will be oversupplied between now and the end of the year, dampening the effect of production cuts on prices.

— Alex Marquardt, Natasha Bertrand, Phil Mattingly, Mark Thompson and Betsy Klein contributed to this report.

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October 5, 2022
A strong fall COVID booster campaign could save 90,000 U.S. lives and avoid more than 936,000 hospitalizations, study finds

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A strong fall COVID booster campaign could save about 90,000 people living in the U.S. from dying of the virus and avoid more than 936,000 hospitalizations, according to a new study by the Commonwealth Fund.

As immunity wanes and new variants that can evade protection from early vaccines emerge, surges in hospitalizations and deaths are increasingly likely this fall and winter, the authors wrote. That makes it important that people get the bivalent boosters recently authorized by the Food and Drug Administration and help stop transmission, they wrote.

Researchers analyzed three scenarios to evaluate the impact of vaccination on reducing fatalities, hospitalizations and medical costs to both the Medicare and Medicaid programs.

The first measured the outcome if daily vaccination rates remain unchanged from current levels; they have gradually declined since the first wave of the omicron variant. Federal financial support has also not been replenished, amid a perception among many Americans that the pandemic is over and as congressional Republicans oppose legislative efforts to continue the pandemic fight.

As of Oct. 3, some 68% of the U.S. population has had primary shots, but fewer than half of those have received a booster dose, and only 36% of those aged 50 and older have had a second booster.

The second and third Commonwealth Fund scenarios looked at outcomes if rates increased by the end of 2022.

In one scenario, researchers imagined booster uptake would track flu-shot coverage in 2020 to 2021. The other scenario assumed 80% of eligible individuals 5 and older get a booster by the end of 2022.

Source: Commonwealth Fund

The data found that more than 75,000 deaths could be prevented along with more than 745,000 hospitalizations if coverage reaches similar levels to 2021 to 2022 flu vaccination. The best scenario would save $56 billion in direct medical costs over the course of the next six months.

“Stratifying by insurance type, we found direct medical costs would be reduced by $11 billion for Medicare alone under scenario 1 and $13 billion under scenario 2,” the authors wrote. “An additional $3.5 to $4.5 billion in savings would accrue to Medicaid. Even if the federal government paid all vaccination costs, accelerated campaigns would generate more than $10 billion in net savings from federal programs like Medicare and Medicaid.”

The study comes as U.S. known cases of COVID are continuing to ease and now stand at their lowest level since late April, although the true tally is likely higher given how many people are testing at home, with data not being collected.

The daily average for new cases stood at 44,484 on Tuesday, according to a New York Times tracker, down 22% from two weeks ago. Cases are rising in most northeastern states by 10% of more, while cases in the are rising in the western states Montana, Washington and Oregon.

The daily average for hospitalizations was down 12% at 27,334, while the daily average for deaths is down 8% to 393.

The new bivalent vaccine might be the first step in developing annual Covid shots, which could follow a similar process to the one used to update flu vaccines every year. Here’s what that process looks like, and why applying it to Covid could be challenging. Illustration: Ryan Trefes

Coronavirus Update: MarketWatch’s daily roundup has been curating and reporting all the latest developments every weekday since the coronavirus pandemic began

Other COVID-19 news you should know about:

• Long COVID, a condition that can encompass symptoms such as respiratory distress, cough, “brain fog,” fatigue and malaise that last 12 weeks or longer after initial infection, is becoming a long-term challenge as both employers and workers navigate an ever-mutating virus, according to Liz Seegert, writing for NextAvenue.org. The Centers for Disease Control and Prevention found that one in five COVID survivors younger than 65 experienced at least one incident that might be related to previous COVID-19 infection. Among those 65 and older, the rate was one in four. Their data also show that nearly three times as many people age 50 to 59 currently have long COVID than those 80 or older.

• A retired judge opened a public inquiry on Tuesday into how Britain handled the coronavirus pandemic, saying bereaved families and those who suffered would be at the heart of the proceedings, the Associated Press reported. Former Court of Appeal judge Heather Hallett said the inquiry would investigate the U.K.’s preparedness for a pandemic, how the government responded, and whether the “level of loss was inevitable or whether things could have been done better.”

With each mutation, the Covid-19 virus is becoming more transmissible. WSJ’s Daniela Hernandez breaks down the science of how Covid variants are getting better at infecting and spreading. Illustration: Rami Abukalam

• Health experts are keeping an eye on new versions of the BA.5 omicron subvariant amid concerns those virus versions can evade the drugs developed to fight COVID, Salon reported. Of particular concern are two named BQ.1 and BQ.1.1, along with BA.2.75.2, which is spreading in Singapore, India and parts of Europe. Then there’s XBB, which some research suggest is the most antibody-evasive strain tested so far. The World Health Organization said in its weekly update on the virus that BA.5 descendent lineages continued to be dominant in the latest week, accounting for 80.8% of sequences shared through a global database. It also noted “increased diversity” within omicron and its lineages.

• Eiger BioPharmaecuticals Inc.
EIGR,
-5.01%
said Wednesday it will not pursue emergency authorization of its experimental treatment for mild and moderate COVID-19 infections. It had asked the Food and Drug Administration to consider an EUA application based on data from the Together trial, a Phase 3 study that has assessed 11 possible treatments for COVID-19 that is being conducted in Brazil and Canada. Eiger said the FDA instead recommended the company consider running its own pivotal trial for peginterferon lambda that would support full approval of the drug.

Here’s what the numbers say:

The global tally of confirmed cases of COVID-19 topped 619.2 million on Wednesday, while the death toll rose above 6.55 million, according to data aggregated by Johns Hopkins University.

The U.S. leads the world with 96.5 million cases and 1,060,446 fatalities.

The Centers for Disease Control and Prevention’s tracker shows that 225.3 million people living in the U.S., equal to 67.9% of the total population, are fully vaccinated, meaning they have had their primary shots. Just 109.9 million have had a booster, equal to 48.8% of the vaccinated population, and 23.9 million of those who are eligible for a second booster have had one, equal to 36.6% of those who received a first booster.

Some 7.6 million people have had a shot of the new bivalent booster that targets the new omicron subvariants that have become dominant around the world.

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October 5, 2022
River City Bank Donates $10,000 to Sacramento Steps Forward

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Press Release
–

Oct 5, 2022

SACRAMENTO, Calif., October 5, 2022 (Newswire.com)
–
River City Bank, Sacramento’s premier business bank, showed its support for ending homelessness and strengthening communities by presenting a $10,000 donation check to Sacramento Steps Forward. The donation supports implementing a new regional coordinated access system to ensure that homelessness is either preventable, brief, or one-time.

“As one of Sacramento’s long-standing community-based businesses, River City Bank is dedicated to seeing our region grow and prosper, and that includes supporting organizations that provide solutions for ending homelessness,” said Steve Fleming, President and CEO of River City Bank. “As the lead agency for Sacramento Continuum of Care, Sacramento Steps Forward is responsible for providing homeless families and individuals with needed housing and support services.”

“Thank you to River City Bank for this generous contribution and for recognizing Sacramento Steps Forward’s work on a comprehensive approach to end homelessness. Homelessness is truly a humanitarian crisis. It touches all of us – from the unimaginable hardships for our unhoused community to the impacts suffered by nearby neighborhoods, businesses, and the community,” said Lisa Bates, CEO of Sacramento Steps Forward. “We are grateful for this investment and the direct impact it will have on systemic solutions in Sacramento.”

River City Bank presented the donation check to Lisa and the SSF executive team members during its client appreciation reception, which was held on Sept. 21, 2022.

As part of the event tradition, River City Bank recognizes and makes a charitable contribution to one of our non-profit clients. River City Bank employees had the challenging, yet rewarding, job of choosing the donation recipient from many charitable organizations with compelling missions.

About River City Bank
Named one of Sacramento Business Journal‘s “50 Fastest Growing Companies” for each of the past six years, River City Bank is the Sacramento region’s premier business bank with assets of over $3.8 billion. River City Bank offers a comprehensive suite of banking services, including loans, deposits and cash management tools to the business, consumer and commercial real estate sectors. With tailored, executive-level service and a long-term investment grade credit rating from Standard & Poor’s, River City Bank redefines the banking experience and every touch point that surrounds it. River City Bank is the largest, independent, locally-owned and managed bank in the Sacramento region with offices in the San Francisco Bay Area and a presence in Southern California. For additional information, please visit www.rivercitybank.com or call (916) 567-2600. Member FDIC. Equal Housing Lender.

About Sacramento Steps Forward

Sacramento Steps Forward is a private, non-profit 501(c)(3) organization serving the Sacramento region leading multi-sector, system-level change to compassionately end homelessness where our vision is an equitable community where everyone has a safe place to call home. Sacramento Steps Forward is also the lead agency for the Sacramento City and County Continuum of Care. For more information about Sacramento Steps Forward, visit SacramentoStepsForward.com.

# # #

Source: River City Bank

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October 5, 2022
Who won the Musk-Twitter fight? Lawyers | CNN Business

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This story is part of CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.

New York
CNN Business
—

Well, well, well. Look who’s asking to buy Twitter for the exact same price he agreed to pay for it four months ago…

In a major reversal just days before he was scheduled to give a deposition, Elon Musk offered to complete his acquisition of Twitter under the original terms of the deal both sides agreed to back in May.

A Twitter spokesperson said in a statement to CNN that the company received Musk’s offer and reiterated its intention to close the deal for the original price of $54.20 per share, or $44 billion.

It wasn’t clear when, or if, Twitter would accept the offer. The case could still go to trial.

Twitter’s shares were halted twice on Tuesday, and jumped more than 20% when they resumed trading.

Let’s step back: Even for a deal that has been defined by unexpected twists and turns, Tuesday’s development is a doozy. A settlement before trial isn’t unusual, but a settlement for the exact same price is.

Should the deal move forward, it’d be a something of a pyrrhic victory for Twitter. The company will have succeeded in securing the best possible price for shareholders (good work if you can get it). But it would also be handing the car keys over to a mercurial billionaire who’s shown little understanding of how media companies work and whose history on the platform is that of an unfiltered troll.

Musk would be the clear loser here, having to tap into billions of his own wealth to finance a deal for a company he no longer wants.

The winners in all of this? The lawyers.

Twitter sued Musk in July to try force him to complete the deal, setting off months of legal back forth between some of the nation’s most powerful white-shoe law firms.

Twitter tapped Wachtell, Rosen, Lipton and Katz — an elite New York practice where partners earn about $8 million a year, according to Bloomberg. On Musk’s side is another Wall Street power firm, Skadden, Arps, Slate, Meagher & Flom.

The bill for both sides combined could easily reach the low- to mid- eight figures, said Peter Ladig, a Delaware lawyer with extensive experience in the court where the Musk-Twitter battle would take place. (“Eight figures” is just a mind-boggling way to phrase the concept of $10 million. Minimum.)

“It appears that Twitter is throwing everything they have at this in terms of bodies, and that adds up quickly,” Ladig told me. “You’re talking probably 20 lawyers at least, I would guess. The amount of data is massive.”

The timing of Musk’s latest pivot can’t be ignored. He was due to sit for a deposition starting Thursday, ahead of a trial scheduled for October 17.

“That is often the leverage point,” Ladig said. “When it comes down to the CEO… being deposed, lots of cases settle on the eve of that deposition.”

There’s a lot to unpack here, and my colleague Clare Duffy is all over it.

For reasons no one really seems to understand, stocks rose sharply again Tuesday.

The Dow has soared more than 1,500 points in the past two days, coming out of bear territory and rising up above the 30,000 milestone.

“It almost feels like a panic rally. The market mood got way too sour and people started to jump in,” said Callie Cox, US investment analyst with eToro. “But this rally feels random. It’s great to see stocks go up but these moves are a little disorienting.”

My colleague Paul R. La Monica has more.

If you’d made the past few days at Credit Suisse into a movie, you might have opened with scene-setting shots of stock and bond traders looking pained, hands in their heads, neckties askew. There’d be scenes of frantic bankers spending all weekend on the phone with clients, assuring them everything is fine. A CEO would slowly sip a glass of Scotch, reading over a memo assuring employees the leadership is doing everything it can to avoid layoffs…

As a connoisseur of the Wall Street-in-crisis genre, I would have been all in.

But it looks like the real-life drama at the Swiss bank may not yield the cinematic crash we’ve come to expect in the shadow of the 2008 financial crisis.

Here’s the thing: Speculation that Credit Suisse was about to collapse sparked a selloff on Monday, with the bank’s shares hitting a record low. It took no time at all for investors and commentators to start speculating about whether Credit Suisse was the new Lehman Brothers — the first big Wall Street domino to fall in the subprime mortgage crisis, almost exactly 14 years ago.

That fear is understandable. When faced with a complex, scary problem, we tend to look to the past for solutions, hoping we can see now what we couldn’t see then.

But, as my colleague Julia Horowitz writes, the hand-wringing over Credit Suisse says more about the market’s ~mood~ right now than it does about the bank’s financial position.

Credit Suisse has been battered by years’ worth of scandals and fines. And there are still risks ahead. But it’s far from bankrupt. One analyst even described Credit Suisse’s liquidity position as “healthy.”

That’s partly why, by Tuesday, the panic was subsiding. Credit Suisse shares bounced back, along with the broader stock market.

“I do not think this is a ‘Lehman moment,’” said Mohamed El-Erian, an adviser to Allianz, on CNBC Monday.

BIG PICTURE

It’s not hard to see why investors would be triggered by Credit Suisse’s latest wobbling, triggered by a memo from the CEO that, rather than assuaging nerves, made people worry the bank was on even less solid footing than it seemed.

Combine that anxiety with the related anxiety of a looming global recession and chaos in UK bond markets and you’ve got yourself a big ol’ anxiety smoothie.

Everyone on Wall Street wants to get ahead of the next big risk, remembering that it doesn’t always come from where you’d expect. (Few saw the dangers in the subprime mortgage trade that predicated the implosion of the housing market in 2008, for example.)

The devil is always in what you don’t know, and Credit Suisse, for all we know, could be exposed to risks that the market doesn’t know about, according to José-Luis Peydró, a professor of finance at Imperial College Business School.

The silver lining: We didn’t emerge from 2008 without some guard rails. Large banks have much higher capital requirements to meet now than they did before the crisis, which should reduce the risk of contagion from any one failure.

Credit Suisse is far from insolvent, but even if things do go from bad to worse, it’d be unlikely to take the whole ship down with it.

Enjoying Nightcap? Sign up and you’ll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. (OK, most nights — we believe in a four-day work week around here.)

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October 4, 2022
In major reversal, Elon Musk again proposes buying Twitter at full price | CNN Business

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New York
CNN
—

Elon Musk on Monday sent a letter to Twitter proposing to follow through with his deal to buy the company at the originally agreed upon price of $54.20 per share, according to a securities filing on Tuesday.

In the letter, Musk said he would proceed with the acquisition on the original terms, pending receipt of the debt financing for the deal and provided that the Delaware Chancery Court stay the litigation proceedings over Musk’s initial attempt to pull out of the deal and adjourn the upcoming trial over the dispute.

A Twitter spokesperson said in a statement to CNN that the company received Musk’s letter and reiterated its previous statement that the “intention of the Company is to close the transaction at $54.20 per share.”

Musk on Tuesday night tweeted: “Buying Twitter is an accelerant to creating X, the everything app.”

News of the letter was first reported by Bloomberg earlier on Tuesday. Twitter

(TWTR) stock was halted twice, the second time for news pending. After the stock resumed trading, it was up more than 20%, topping $51 a share and approaching the agreed upon deal price for the first time in months.

The news comes as the the two sides have been preparing to head to trial in two weeks over Musk’s attempt to terminate of the $44 billion acquisition agreement, which Twitter had sued him to complete. Twitter CEO Parag Agrawal had been set to be deposed by Musk’s lawyers on Monday, and Twitter’s lawyers had planned to depose Musk starting on Thursday.

It also follows the release on Friday of a trove of Musk’s personal text messages about the deal. The messages offered a look at the cast of Silicon Valley insiders and billionaires — from Larry Ellison to members of the Murdoch family — who contacted him to weigh in on and, in some cases, offer financing for the deal.

Such an agreement could bring to an end a contentious, months-long back and forth between Musk and Twitter that has caused massive uncertainty for employees, investors and users of one of the world’s most influential social media platforms.

The ball will now be in Twitter’s court to determine how to respond to Musk’s proposal. Twitter’s board will likely agree to move forward with closing the deal, according to Josh White, assistant professor of finance at Vanderbilt University.

“The very public saga has certainly taken a toll on them and Twitter employees,” White said. “It is best for all parties to finish the deal and make a quick and seamless transition. I suspect it will close quickly.”

However, Twitter may not want to hit pause on the litigation, per Musk’s proposal, until the deal is officially closed, according to Columbia Law School professor Eric Talley. The company may want to proceed with the litigation process as it negotiates with Musk, in case his offer to complete the deal falls through again.

“Twitter is probably going to say, ‘look, we definitely want to engage you on this … But we’ve still got a trial on Oct 17 and until this is signed, sealed and delivered, we’ve got to get ready for trial,” Talley said.

The saga began in April when Musk revealed he had become Twitter’s largest shareholder. Over the next several months, Musk accepted and then backed out of an offer to sit on Twitter’s board, threatened a hostile takeover of the company, signed an agreement to buy the company, started raising concerns about bots on the platform, attempted to terminate the agreement, was sued by Twitter to follow through with the deal and added claims from a Twitter whistleblower to his argument.

Musk initially moved to terminate the deal citing claims that the company has misstated the number of spam and fake bot accounts on the platform. Twitter claimed that Musk had breached the deal and was using bots as a pretext to exit a deal he’d gotten buyer’s remorse over after the broader market decline, which also hurt Tesla stock and, by extension, Musk’s personal wealth.

Throughout the back and forth, Twitter had maintained that it planned to follow through with deal at the price and terms originally agreed upon.

Many legal experts have said that Twitter has the stronger argument heading into court, and that Musk would a face a significant burden in trying to prove that the company had made materially misleading statements in its securities filings or in the deal contract.

The lawsuit was the final hurdle remaining in the way of the deal getting closed, after Twitter shareholders last month voted to approve the deal. The deal had originally been set to close this month.

With news that the deal could end up closing, attention may once again shift to what Musk’s control could mean for the social media platform.

Musk has previously suggested a series of potential changes to Twitter, the most significant of which could be returning former President Donald Trump to the platform and doing away with permanent account bans. Musk has also said he wants to make Twitter more open to “free speech” and could change its content moderation policies.

Twitter employees have also raised questions about what a Musk takeover could mean for benefits such as remote working and parental leave.

Twitter General Counsel Sean Edgett said in a message to employees Tuesday that the company had received Musk’s letter and planned to close the deal at $54.20 per share. “I will continue to keep you posted on significant updates, but in the meantime, thank you for your patience as we work through this on the legal side,” he said, according to a copy of the message obtained by CNN.

Blind, an anonymous private forum popular among Twitter employees, was abuzz on Tuesday amid reports about Musk’s reversal. Reaction on the forum was overwhelmingly negative, according to screenshots provided to CNN by a Twitter employee.

“Cue the layoffs,” one comment read. Several other employees expressed fear that Musk would roll back Twitter’s benefits package, including the severance offered to departing employees.

–CNN’s Donie O’Sullivan contributed to this report.

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October 4, 2022
White House launches last ditch effort to dissuade OPEC from cutting oil production to avoid a ‘total disaster’ | CNN Politics

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Washington
CNN
—

The Biden administration has launched a full-scale pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from dramatically cutting oil production, according to multiple sources familiar with the matter.

The push comes ahead of Wednesday’s crucial meeting of OPEC+, the international cartel of oil producers that is widely expected to announce a significant cut to output in an effort to raise oil prices. That in turn would cause US gasoline prices to rise at a precarious time for the Biden administration, just five weeks before the midterm elections.

For the past several days, President Joe Biden’s senior-most energy, economic and foreign policy officials have been enlisted to lobby their foreign counterparts in Middle Eastern allied countries including Kuwait, Saudi Arabia, and the UAE to vote against cutting oil production.

Members of the Saudi-led oil cartel and its allies including Russia, known as OPEC+, are expected to announce production cuts potentially up to more than one million barrels per day. That would be the largest cut since the beginning of the pandemic and could lead to a dramatic spike in oil prices.

Some of the draft talking points circulated by the White House to the Treasury Department on Monday that were obtained by CNN framed the prospect of a production cut as a “total disaster” and warned that it could be taken as a “hostile act.”

“It’s important everyone is aware of just how high the stakes are,” said a US official of what was framed as a broad administration effort that is expected to continue in the lead up to the Wednesday OPEC+ meeting.

The White House is “having a spasm and panicking,” another US official said, describing this latest administration effort as “taking the gloves off.” According to a White House official, the talking points were being drafted and exchanged by staffers and not approved by White House leadership or used with foreign partners.

In a statement to CNN, National Security Council spokesperson Adrienne Watson said, “We’ve been clear that energy supply should meet demand to support economic growth and lower prices for consumers around the world and we will continue to talk with our partners about that.”

For Biden, a dramatic cut in oil production could not come at a worse time. The administration has for months engaged in an intensive domestic and foreign policy effort to mitigate soaring energy prices in the wake of Russia’s invasion of Ukraine. That work appeared to pay off, with US gasoline prices falling for almost 100 days in a row.

But with just a month to go before the critical midterm elections, US gasoline prices have begun to creep up again, posing a political risk the White House is desperately trying to avoid. As US officials have moved to gauge potential domestic options to head off gradual increases over the last several weeks, the news of major OPEC+ action presents a particularly acute challenge.

Watson, the NSC spokesperson declined to comment on the midterms, saying instead, “Thanks to the President’s efforts, energy prices have declined sharply from their highs and American consumers are paying far less at the pump.”

Amos Hochstein, Biden’s top energy envoy, has played a leading role in the lobbying effort, which has been far more extensive than previously reported amid extreme concern in the White House over the potential cut. Hochstein, along with top national security official Brett McGurk and the administration’s special envoy to Yemen Tim Lenderking, traveled to Jeddah late last month to discuss a range of energy and security issues as a follow up to Biden’s high-profile visit to Saudi Arabia in July.

Officials across the administration’s economic and foreign policy teams have also been involved with reaching out to OPEC governments as part of the latest effort to stave off a production cut.

The White House has asked Treasury Secretary Janet Yellen to make the case personally to some Gulf state finance ministers, including from Kuwait and the UAE, and try to convince them that a production cut would be extremely damaging to the global economy. The US has argued that in the long-run a cut in oil production would create more downward pressure on prices – the opposite of what a significant cut would be designed to accomplish. Their logic is that “cutting right now would increase risks of inflation,” lead to higher interest rates and ultimately a greater risk of recession.

“There is great political risk to your reputation and relations with the United States and the west if you move forward,” the White House draft talking points suggested Yellen communicate to her foreign counterparts.

A senior US official acknowledged that the administration has been lobbying the Saudi-led coalition for weeks to try to convince them not to cut oil production.

It comes less than three months after President Joe Biden traveled to Saudi Arabia and met with Crown Prince Mohammed bin Salman on a trip that was driven in part by a desire to convince Saudi Arabia, the de facto leader of OPEC, to increase oil production which would help bring down the then-skyrocketing gas prices.

When OPEC+ agreed a few weeks later to a modest 100,000 barrel increase in production, critics argued Biden had gotten little out of the trip.

The trip was billed as a meeting with regional leaders about issues critical to US national security, including Iran, Israel and Yemen. It was criticized for its lack of results and for rehabbing the image of the crown prince who had been directly blamed by Biden for orchestrating the killing of Washington Post columnist Jamal Khashoggi.

In the months leading up to the meeting, Biden’s top aides for the Middle East and energy, McGurk and Hochstein, shuttled between Washington and Saudi Arabia planning and coordinating the visit.

One diplomatic official in the region described the US campaign to block production cuts as less of a hard sell, and more of an effort to underscore a critical international moment given the economic fragility and ongoing war in Ukraine. Though another source familiar with the discussions told CNN it was described by a diplomat from one of the countries approached as “desperate.”

A source familiar with the outreach says a call was planned with the UAE but the effort was rebuffed by Kuwait. Kuwait’s embassy in Washington did not immediately respond to a request for comment. Neither did Saudi Arabia’s. The UAE embassy declined to comment.

Publicly, the White House has cautiously avoided weighing in on the possibility of a dramatic oil production cut.

“We are not members of OPEC+, and so I don’t want to get ahead of what could potentially come out of that meeting,” White House press secretary Karine Jean-Pierre told reporters Monday. The US focus, Jean-Pierre said, remains “taking every step to ensure markets are sufficiently supplied to meet demand for a growing global economy.”

OPEC+ members are weighing a more dramatic cut due to what has been a precipitous decline in prices, which have dropped sharply to below $90 per barrel in recent months.

Hanging over Wednesday’s OPEC+ meeting in Vienna will also be the looming oil price cap that European nations intend to impose on Russian oil exports as punishment for Russia’s invasion of Ukraine. Many OPEC+ members, not only Russia, have expressed unhappiness with the prospect of a price cap because of the precedent it could set for consumers, rather than the market, to dictate the price of oil.

Included in the White House talking points to Treasury was a US proposal that if OPEC+ decides against a cut this week the US will announce a buyback of up to 200 million barrels to refill its Strategic Petroleum Reserve (SPR), an emergency stockpile of petroleum that the US has been tapping into this year to help lower oil prices.

The administration has made it clear to OPEC+ for months, the senior US official said, that the US is willing to buy OPEC’s oil to replenish the SPR. The idea has been to convey to OPEC+ that the US “won’t leave them hanging dry” if they invest money in production, the official said, and therefore, that prices won’t collapse if global demand decreases.

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October 4, 2022