WASHINGTON (Reuters) -U.S. Treasury Secretary Scott Bessent met with BlackRock Inc executive Rick Rieder in New York on Friday, as the Trump administration continued its search for a new chair for the Federal Reserve, a source familiar with the matter said.
Bessent has now spoken with four of the 11 candidates on the administration’s list of candidates to replace Fed chair Jerome Powell, whose term expires in May, the source said.
Bloomberg first reported Bessent’s meeting with Rieder, BlackRock’s CIO of fixed income, and called him a rising contender for the post. The two met for two hours and discussed monetary policy, the Fed’s organizational structure and regulatory policy, it said.
U.S. President Donald Trump had told reporters at the White House a week ago that his short list for the job included his aide Kevin Hassett, former Fed Governor Kevin Warsh and current Fed Governor Christopher Waller.
At the time, Trump said he had eyed Bessent for the job, but the Treasury secretary declined.
Bessent has said he will meet with the candidates to whittle down the list and present Trump with a list of top contenders.
TRUMP HAS RAILED AGAINST POWELL
Trump has made clear he intends to install a Fed leader more aligned with his push for rapid interest-rate cuts after months of railing against Powell for being “too late” to lower interest rates and bring down borrowing costs.
Powell’s Fed has kept rates on hold all year on concern that Trump’s tariffs could reignite inflation, although his concerns have shifted recently to focus more on the slowing labor market.
The U.S. Senate is slated to vote on Monday to confirm White House Council of Economic Advisers Chair Stephen Miran to the Fed, which starts a two-day meeting Tuesday at which it is expected to cut its policy rate by a quarter of a percentage point. Miran will retain his White House job, but take an unpaid leave while at the Fed.
Miran would replace Adriana Kugler, who was appointed by former President Joe Biden and resigned as Fed governor last month.
Trump has sought to fire another Fed governor appointed by Biden, Lisa Cook, but that move has been blocked for now by a federal judge.
(Reporting by Andrea Shalal; editing by Edward Tobin)
The price of bitcoin neared $68,400 on Wednesday, reaching its highest level since July and sparking a rally across the crypto sector.
Bitcoin is up more than 9% over the past week and ether is up about 7%. Other popular coins have also rallied, with solana up close to 10% in the past seven days and dogecoin up 15%.
The gains have made their way to crypto-pegged stocks. Digital asset exchange Coinbase climbed almost 7% on Wednesday, bringing its three-day rally to 19%. The stock is at its highest since August.
Bitcoin and Coinbase move higher in the last week.
One reason for bitcoin’s 53% gain so far this year is a host of new spot bitcoin exchange-traded funds that hit the market in January, welcoming in a host of new investors. Ether ETFs followed in July.
Investors have bought $1.2 billion in ETF shares in the past three days, bringing total holdings to more than $63 billion. BlackRock’s iShares Bitcoin Trust (IBIT) has accounted for more than 30% of the new purchases.
Samara Cohen, chief investment officer of ETF and index investments at BlackRock, told CNBC recently that 80% of buyers of IBIT are direct investors. Of those, 75% have never owned a BlackRock ETF, she said.
“We went into this journey with the expectation that we needed to educate ETF investors on crypto and on bitcoin specifically,” Cohen said. “As it turns out, we have done a lot of education of crypto investors on the benefits of the ETP wrapper.”
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Two stocks are getting the call-up from our Bullpen stocks-to-watch list. We’re initiating positions for Jim Cramer’s Charitable Trust in BlackRock and CrowdStrike . We’re buying 17 shares of BLK at $1012.44 each. We’re buying 60 shares of CRWD at $305. Following Wednesday’s trades, BlackRock will have a roughly 0.5% weighting in the Trust, the portfolio used for the Investing Club. CrowdStrike will have a roughly 0.5% weighting. BlackRock is the world’s largest asset management manager and leading provider of investment, advisor, and risk management solutions. It offers a broad set of investment products in equity, fixed income, multi-asset, alternatives, and cash across different client types like Institutional, Retail, and ETFs, around the world. About 43% of its base fees come from actively managed products, 42% from ETFs, 8% from Index, and 7% from cash. Blackrock reported a strong set of third-quarter results last Friday. Total revenues increased 15% year over year to $5.2 billion thanks to the positive impact of markets on average assets under management, 5% organic base fee growth, and higher performance fees. And that 5% organic base fee growth was the company’s highest level in the last three years. BLK YTD mountain BlackRock YTD BlackRock lived up to its reputation as a premier asset gatherer, generating $221 billion of net inflows in the quarter – a company record. The company is having a huge year. Through the first three quarters of 2024, net inflows already surpassed the full-year net inflows of both 2022 and 2023. Assets under management stood at about $11.5 trillion at the end of its third quarter, up $2.4 trillion year over year. Profitability was another highlight. The company continues to deliver sustained asset and technology services growth at scale while remaining disciplined on expenses. Adjusted operating margins expanded 350 basis points year over year to 45.8%, leading to adjusted earnings per share of $11.46, well above estimates of $10.40. The company bought $375 million worth of shares in the quarter, slightly reducing its weighted average diluted shares. The company also pays a dividend yield of about 2% and has increased its payout for 15 straight years. One of the company’s biggest strategic pushes right now is in alternative strategies like private markets and infrastructure. Earlier this month, BlackRock completed its acquisition of Global Infrastructure Partners, a leading independent infrastructure fund manager. The company believes this combination “will provide clients access to investment and operating expertise across the infrastructure landscape.” Blackrock believes infrastructure is a $1 trillion market today and will continue to be one of the fastest-growing segments of private markets in the years ahead. The deal brought in an additional $116 billion of client AUM and $70 billion of fee-paying AUM. It also added long-dated, non-redeemable assets to Blackrock’s business, which the company likes because it diversifies its revenue and earnings mix. Management believes these private market assets will positively impact the company’s overall effective fee rate by 0.5 to 1 full basis point. The stock has had a big move this year, gaining roughly 24% but we think the gains can continue. It’s a pretty steady business with market-leading organic growth, margin expansion, plus a dividend and buyback. Also, BlackRock should see an acceleration of inflows into Fixed Income as central banks cut rates, pushing some of the record amount of assets in Money Markets to flow into bond funds and ETFs. CEO Larry Fink addressed the large cash holdings of investors on the earnings call, explaining that “investors will have to re-risk to meet their long-term return needs.” Fink sees opportunities for investors across several structural trends like “rapid advancements in technology and AI, and rewiring of globalization, and the unprecedented need for new infrastructure.” Fink is a thought leader in the banking industry. We’re starting the position off on the smaller side given its recent run to new highs, and we’ll take advantage of pullbacks to add to our position. Our price target is $1,150, which is roughly 24 times the consensus 2025 EPS forecast of $48.47 per FactSet. CRWD YTD mountain CrowdStrike YTD Next up is CrowdStrike, the cybersecurity company led by its co-founder and CEO George Kurtz, who Jim has had on “Mad Money” many times. CrowdStrike specializes in endpoint protection through its AI-native platform called Falcon. The Falcon platform operates entirely in the cloud, allowing for rapid updates, scalability, and ease of deployment. There’s a good whitepaper on CrowdStrike’s website published by IDC that explains the value of the CrowdStrike Falcon XDR platform. It stops breaches. But it also saves time by speeding up threat protection and response while also helping security teams do more with less. It saves money by reducing the cost of cybersecurity – companies can get rid of less effective platforms and consolidate point solutions. The IDC report found that customers realized a $6 return for every $1 invested with a 5-month payback period after they used the Falcon XDR platform. CrowdStrike was virtually unstoppable this year until July 19 when a faulty software update to its Falcon Sensor security software system caused a global problem with computers running Microsoft Windows. It was a major blow for a cybersecurity company, especially one with a pristine reputation. There was a lot of speculation that the outages would hurt their business from customers revolting, resulting in a loss in market share. However, when CrowdStrike reported at the end of August, the results were excellent with revenue up 32% year over year and adjusted earnings per share of $1.04 versus the 97-cent consensus. Even better, the company showed a gross retention rate of 98%, a sign that virtually no business was lost from the event. More recently, the company held its annual Fal.Con conference in September and it seemed to get a great reception, with attendance up 30% versus last year. Microsoft CEO Satya Nadella spoke at the event which suggested the two companies have buried the hatchet. They’ve had this rivalry for years, but ironically the incident brought the two companies closer together. Shares of CrowdStrike may be up almost 40% since bottoming in early August, but it is still down more than 10% from the July 19 incident and about 23% from its closing high of $392.15 on July 1. This could be an opportunity since virtually no business was lost. Our initial price target is $350, which is roughly where the stock traded right before the July 19th outage. We think the stock should return to these levels since virtually no business was lost. You might be wondering if adding CrowdStrike to the portfolio means that we are heading to the exit on Palo Alto Networks . Does having two cybersecurity companies violate our rules about diversification? We typically don’t like to double up in one area, but we think there is room in the portfolio for both of these best-of-breed names because of position sizing. Palo Alto Networks isn’t that big of a position in the portfolio anymore because of all the huge gains we’ve locked in. Cybersecurity is a great area to be invested in. We’re in an elevated threat environment given all the hostilities happening around the world. Artificial intelligence and Gen AI have made bad actors more sophisticated, so corporations need to invest with the leaders in the industry to stay protected. We’re almost a year into the new SEC rules surrounding the disclosure of cybersecurity incidents, and greater awareness of threats has been a tailwind. (Jim Cramer’s Charitable Trust is long BLK, CRWD, MSFT, PANW. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Jim Cramer has been considering a potential investment in BlackRock, the world’s largest asset manager, and we’re now adding it to our Bullpen stocks-to-watch list. The news BlackRock shares surged to a record high Friday after the firm posted third-quarter earnings that crushed analysts’ expectations, yet again. Management also announced that assets under management reached another record high, an incredible $11.5 trillion, on surging inflows as the stock market rallied. “We’ve added $2 trillion organically over the last five years. $2 trillion is the equivalent of being in the ranks of the sixth largest asset managers,” CEO Larry Fink told CNBC on Friday after the release. Fink also praised BlackRock’s recent $12.5 billion acquisition of Global Infrastructure Partners, which added more than $100 billion in assets. Big picture The financial industry kicked off quarterly earnings Friday. In addition to BlackRock, Club name Wells Fargo was among the companies that delivered strong results. Morgan Stanley , also in the portfolio, reports next Wednesday. It’s been a murky operating environment for the Wall Street behemoths, which were forced to navigate higher-for-longer interest rates until the Federal Reserve finally cut rates last month. The Fed’s next move has been a point of debate. Right after last month’s jumbo 50-basis-point cut, the market had expected another 75 basis points worth of cuts before year-end. Now that odds favor just 50. Bottom line BlackRock’s stellar quarterly results highlight another reason for the Club to consider an initiation of the stock. That’s why we put the stock in the Bullpen. Management’s track record draws us in further as Fink expands the firm’s footprint in private markets, and delivers quarter after quarter of steller inflows. BlackRock shares have been on a tear recently – up more than 12% in the past month versus the S & P 500’s roughly 4% gain. Jim Cramer said Friday he knows the stock has run a lot, “but that doesn’t mean it can’t run more.” Why have we waited to pull the trigger on the stock? Jim said Thursday he wished he had but he’s been dealing with Wells Fargo and Morgan Stanley, and we don’t make these moves in haste. (Jim Cramer’s Charitable Trust is long MS, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
BlackRock CEO Larry Fink speaks during the New York Times DealBook Summit Nov. 30, 2022 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
Jim Cramer has been considering a potential investment in BlackRock, the world’s largest asset manager, and we’re now adding it to our Bullpen stocks-to-watch list.
Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Friday’s key moments. U.S. stocks jumped Friday, with the S & P 500 on pace for its fifth straight week of gains. The government’s producer price index was cooler than expected, one day after a slightly hotter consumer price index. Bank earnings are the star of the show. During the Club’s Morning Meeting, Jim Cramer said Wall Street is “starting earnings season off with a bang.” Club stock Wells Fargo rose more than 5.5% after quarterly profit exceeded estimates. Check your email inboxes and your texts shortly for our full Wells Fargo earnings commentary. Jim said he would like to buy some more Advanced Micro Devices if he weren’t restricted due to the Club’s trading rules. AMD dropped 1% on Wednesday and then another 4% on Thursday following its Advancing AI meeting. Melius Research said the stock sold off because the market wanted to see another cloud giant in attendance. Jim said the AMD slide was a bit unfair because Jensen Huang, CEO of AI chip leader Nvidia CEO, sucked all the oxygen out of the room during a three-day roadshow. Palo Alto Networks stock is having a great week, up 10% through early Friday, and our best weekly performer. Morgan Stanley raised its price target on the cybersecurity stock to $421 per share from $390. That implies 14% upside from Thursday’s close. We battled the stock, buying some on the dip in early August and then taking some profits later in the month. Jim has been considering adding cyber rival CrowdStrike to the portfolio, pointing out that Bullpen name CrowdStrike didn’t lose customers after its glitch caused a worldwide IT outage in July. Stocks covered in Friday’s rapid fire at the end of the video were: JPMorgan , BlackRock , Tesla , Affirm , and Ferrari . (Jim Cramer’s Charitable Trust is long WFC, AMD, PANW. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Friday’s key moments.
Larry Fink, BlackRock CEO and chairman, joins CNBC’s ‘Squawk on the Street’ to discuss his firm’s third-quarter earnings beat, how the growth of capital markets is driving its strategy, and more.
Morgan Stanley on Friday told its army of financial advisors that it will soon allow them to offer bitcoin ETFs to some clients, a first among major Wall Street banks, CNBC has learned.
The firm’s 15,000 or so financial advisors can solicit eligible clients to purchase shares of two exchange-traded bitcoin funds starting Wednesday, according to people with knowledge of the policy.
The move from Morgan Stanley, one of the world’s largest wealth management firms, is the latest sign of the adoption of bitcoin by mainstream finance. In January, the U.S. Securities and Exchange Commission approved applications for 11 spot bitcoin ETFs, heralding the arrival of an investment vehicle for bitcoin that is easier to access, cheaper to own and more readily traded.
So it’s not surprising that Wall Street’s major wealth management businesses didn’t immediately embrace the new ETFs, forbidding their financial advisors from pitching them and only allowing trades if clients actively sought out the product.
Morgan Stanley made the move in response to demand from clients and in an attempt to follow an evolving marketplace for digital assets, said the people, who declined to be identified speaking about the bank’s internal policies.
The bank is still striking a note of caution, however, in the rollout: Only clients with a net worth of at least $1.5 million, an aggressive risk tolerance and the desire to make speculative investments are suitable for bitcoin ETF solicitation, said the people. The investments are for taxable brokerage accounts, not retirement accounts, they added.
The bank will monitor clients’ crypto holdings to make sure they don’t end up with excessive exposure to the volatile asset class, according to the sources.
The only crypto investments approved for solicited purchase at Morgan Stanley are the pair of bitcoin ETFs from BlackRock and Fidelity; private funds from Galaxy and FS NYDIG that the bank made available starting in 2021 were phased out earlier this year.
Morgan Stanley is watching how the market for newly approved ether ETFs develops and hasn’t committed to whether it would provide access to those, the people said.
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Correction: Private funds from Galaxy and FS NYDIG that Morgan Stanley made available starting in 2021 were phased out earlier this year. An earlier version of this story included inaccurate information from Morgan Stanley sources about the company’s crypto investment offerings.
The leaders of Wall Street’s most powerful firms are speaking out to condemn the attempted assassination of former President Donald Trump at a Pennsylvania rally over the weekend.
JPMorgan Chase CEO Jamie Dimon told employees Sunday that he and his management team were “deeply saddened by the political violence” and attempt on Trump’s life. The shooting killed one bystander and injured two more.
“We must all stand firmly together against any acts of hate, intimidation or violence that seek to undermine our democracy or inflict harm,” Dimon said in the memo. “It is only through constructive dialogue that we can tackle our nation’s toughest challenges.”
Goldman Sachs CEO David Solomon addressed the matter at the start of an earnings call Monday morning, calling the attempted assassination a “horrible act of violence.”
“We are grateful that he is safe and also want to extend my sincere condolences to the families of those who were tragically killed and severely injured,” Solomon said. “It is a sad moment for our country. There’s no place in our politics for violence.”
The shooting on Saturday shocked a nation gearing up for a contentious November election. Wall Street firms don’t officially endorse political candidates since they have to deal with both Republican and Democrat officials, though their executives and employees often donate to campaigns.
“It is a statement of America today, though. We need to create hope. All of us have a responsibility, every political candidate, every leader, every pastor, minister, rabbi, we all have a responsibility of bringing our community together to bring hope,” Fink said.
BlackRock, the world’s largest asset manager, said Sunday in an email that it ran an advertisement in 2022 in which the suspected shooter, Thomas Matthew Crooks, appears briefly in the background along with other students of Bethel Park High School in Pennsylvania.
“We will make all video footage available to the appropriate authorities, and we have removed the video from circulation out of respect for the victims,” BlackRock said in a statement.
Bank of America CEO Brian Moynihan also addressed employees over the weekend.
“We are deeply saddened for the family of the rally attendee who died at the event,” Moynihan said in the staff email. “Our thoughts are with former President Donald Trump, all those injured, and their families.”
British neobank Monzo said Wednesday that it’s raised another $190 million, lifting the total it’s raised so far this year to $610 million.
The company told CNBC it raised the cash from new investors including Hedosophia, a backer of top European fintechs including N26 and Qonto. CapitalG, Alphabet’s independent growth fund, also participated in the round.
Singaporean sovereign wealth fund GIC also participated in Monzo’s latest fundraise, a source familiar with the matter told CNBC. The source spoke on the condition of anonymity as details of GIC’s involvement aren’t yet public.
GIC declined to comment.
The latest funding values Monzo at roughly $5.2 billion, an increase on the $5 billion valuation it attained in March when it raised $430 million. The total $610 million round marks the single-biggest funding round for a European fintech in the past year, according to Dealroom data.
TS Anil, CEO of Monzo, told CNBC his firm plans to use the cash to build new products and accelerate its international expansion plans.
“At the heart of it we are a mission-oriented company that’s looking to build the single place where people can meet all of their financial needs,” Anil told CNBC in an exclusive interview.
“What’s exciting to me is that, as we pursue that mission of changing people’s relationship with money, we’ve built a business model that is congruent with that as well, with this model that is built entirely around the customer.”
Monzo entered the black for the first time last year, hitting profitability following the end of its 2023 fiscal year. Anil said Monzo’s looking to ramp up profits with diversification into other income generators, like lending and savings.
Notably, Anil said that Monzo’s planning to launch its first pensions product in the next six to nine months.
That would put it in competition with traditional lenders including Barclays and NatWest. Last year, NatWest acquired 85% of U.K. workplace pension services provider Cushon for £144 million ($180 million).
Monzo’s funding expansion caps off a busy year for the nine-year-old firm, which now counts more than 9 million retail customers in the U.K. — 2 million of whom joined Monzo last year alone — and over 400,000 business customers.
Anil said Monzo identified that about a third of people using the service had never invested previously — and, more notably, 45% of the women investing via the Monzo app are first-time investors.
Another big priority for Monzo in the coming months is international expansion.
The company recently restarted its U.S. expansion efforts, hiring a long-time executive from Block’s Cash App as its new U.S. CEO after earlier abandoning a bid to acquire a banking license from U.S. regulators.
For now, Anil says, Monzo’s team in the U.S. is primarily focusing on product to ensure that the service it has there is of high enough quality that it can compete with major incumbents like JPMorgan and Citibank.
The U.S. has proven notoriously difficult for European neobanks to crack.
Revolut, meanwhile, has failed to formally file an application for a U.S. bank charter yet despite having earlier said it intends to file a draft application for a U.S. bank license.
“What I like about how we’re approaching this is, at the heart of it, it’s not just words,” Anil told CNBC in an exclusive interview Tuesday.
“The necessary conditions for the U.S. for us is getting the product right. That’s what we’re spending our time and effort on there.”
European expansion is also on the cards, Anil said, although he didn’t commit to a date for when this will happen.
Longer term, Monzo is also planning to launch a mortgages product, which would see it compete much more aggressively with U.K. retail banks in the world of lending.
Monzo currently offers monthly installment plans and consumer loans via its app.
It also has a “Mortgage Tracker” feature which lets users track how much they’ve paid toward their mortgage and how much equity they’ve built.
But it’s yet to officially roll out a service that would let people apply for mortgages directly within its app.
Anil said Monzo is in the early stages of exploring partnerships with lenders to offer this.
He declined to name any prospective partners.
One thing Monzo hasn’t got any immediate plans for is an initial public offering.
Although he thinks Monzo will make a “great public company one day,” Anil said it’s still too early to talk of an IPO. He says he’s focused on growing Monzo at scale before reaching that milestone.
The identity of the stock — or stocks — that Berkshire has been snapping up could be revealed Saturday at the company’s annual shareholder meeting in Omaha, Nebraska.
That’s because unless Berkshire has been granted confidential treatment on the investment for a third quarter in a row, the stake will be disclosed in filings later this month. So the 93-year-old Berkshire CEO may decide to explain his rationale to the thousands of investors flocking to the gathering.
The bet, shrouded in mystery, has captivated Berkshire investors since it first appeared in disclosures late last year. At a time when Buffett has been a net seller of stocks and lamented a dearth of opportunities capable of “truly moving the needle at Berkshire,” he has apparently found something he likes — and in the financial realm no less.
That’s an area he has dialed back on in recent years over concerns about rising loan defaults. High interest rates have taken a toll on some financial players like regional U.S. banks, while making the yield on Berkshire’s cash pile in instruments like T-bills suddenly attractive.
“When you are the GOAT of investing, people are interested in what you think is good,” said Glenview Trust Co. Chief Investment Officer Bill Stone, using an acronym for greatest of all time. “What makes it even more exciting is that banks are in his circle of competence.”
Under Buffett, Berkshire has trounced the S&P 500 over nearly six decades with a 19.8% compounded annual gain, compared with the 10.2% yearly rise of the index.
Coverage note: The annual meeting will be exclusively broadcast on CNBC and livestreamed on CNBC.com. Our special coverage will begin Saturday at 9:30 a.m. ET.
Berkshire requested anonymity for the trades because if the stock was known before the conglomerate finished building its position, others would plow into the stock as well, driving up the price, according to David Kass, a finance professor at the University of Maryland.
Buffett is said to control roughly 90% of Berkshire’s massive stock portfolio, leaving his deputies Todd Combs and Ted Weschler the rest, Kass said.
While investment disclosures give no clue as to what the stock could be, Stone, Kass and other Buffett watchers believe it is a multibillion-dollar wager on a financial name.
That’s because the cost basis of banks, insurers and finance stocks owned by the company jumped by $3.59 billion in the second half of last year, the only category to increase, according to separate Berkshire filings.
At the same time, Berkshire exited financial names by dumping insurers Markel and Globe Life, leading investors to estimate that the wager could be as large as $4 billion or $5 billion through the end of 2023. It’s unknown whether that bet was on one company or spread over multiple firms in an industry.
If it were a classic Buffett bet — a big stake in a single company — that stock would have to be a large one, with perhaps a $100 billion market capitalization. Holdings of at least 5% in publicly traded American companies trigger disclosure requirements.
Investors have been speculating for months about what the stock could be. Finance covers all manner of companies, from retail lenders to Wall Street brokers, payments companies and various sectors of insurance.
“Schwab was beaten down during the regional banking crisis last year, they had an issue where retail investors were trading out of cash into higher-yielding investments,” Shanahan said. “Nobody wanted to own that name last year, so Buffett could’ve bought as much as he wanted.”
Other names that have been circulated — JPMorgan Chase or BlackRock, for example, are possible, but may make less sense given valuations or business mix. Truist and other higher-quality regional banks might also fit Buffett’s parameters, as well as insurer AIG, Shanahan said, though their market capitalizations are smaller.
Berkshire has owned financial names for decades, and Buffett has stepped in to inject capital — and confidence — into the industry on multiple occasions.
Buffett served as CEO of a scandal-stricken Salomon Brothers in the early 1990s to help turn the company around. He pumped $5 billion into Goldman Sachs in 2008 and another $5 billion into Bank of America in 2011, ultimately becoming the latter’s largest shareholder.
But after loading up on lenders in 2018, from universal banks like JPMorgan to regional lenders like PNC Financial and U.S. Bank, he deeply pared his exposure to the sector in 2020 on concerns that the coronavirus pandemic would punish the industry.
Since then, he and his deputies have mostly avoided adding to his finance stakes, besides modest positions in Citigroup and Capital One.
Last May, Buffett told shareholders to expect more turbulence in banking. He said Berkshire could deploy more capital in the industry, if needed.
“The situation in banking is very similar to what it’s always been in banking, which is that fear is contagious,” Buffett said. “Historically, sometimes the fear was justified, sometimes it wasn’t.”
Wherever he placed his bet, the move will be seen as a boost to the company, perhaps even the sector, given Buffett’s track record of identifying value.
It’s unclear how long regulators will allow Berkshire to shield its moves.
“I’m hopeful he’ll reveal the name and talk about the strategy behind it,” Shanahan said. “The SEC’s patience can wear out, at some point it’ll look like Berkshire’s getting favorable treatment.”
CNBC’s Jim Cramer on Friday told investors what to watch for on Wall Street next week, highlighting JPMorgan‘s market-moving health-care conference in San Francisco. Taking place from Monday to Thursday, the conference is one of the year’s largest gatherings of major industry CEOs where they reveal earnings guidance and updates on clinical trial research.
“The new year has started with a redistribution of cash out of the ‘Magnificent Seven’ and on to the sidelines,” Cramer said, pointing to health-care stocks as a particularly notable group that will likely be “propelled by what people expect to hear from the JPMorgan Healthcare Conference.”
Cramer will interview several CEOs at the conference, starting with Walgreens CEO Tim Wentworth on Monday. Cramer said he’s interested to hear how the company plans to get its groove back after cutting its dividend nearly in half this week. Cramer will also speak with leadership from Amgen and Medtronic, as well as the new CEO of Bristol Myers, Chris Boerner, whom he’ll ask about the company’s rigorous biotech acquisition plans.
On Tuesday and Wednesday, Cramer will continue to interview the CEOs of major industry names, including Eli Lilly CEO David Ricks. Cramer said he’s particularly interested in the company’s diabetes and weight loss drug as well as its Alzheimer’s initiative. He’ll also speak with CVS Health CEO Karen S. Lynch to discuss the company’s ongoing transition from drug store to health-care provider. Cramer will also hear from the CEOs of Pfizer, Regeneron, Novartis, Abbott Labs and Cencora.
Thursday brings the consumer price index for December. Cramer said he thinks those hoping for soft figures will be disappointed. Cramer will also be tuning into CES, the Consumer Electronics Show, next week. The tech event will include commentary by leadership from Nvidia and Dell.
Earnings season kicks off Friday with reports from major banks including JPMorgan, Bank of America and Wells Fargo. BlackRock will also report, and Cramer said he thinks the company’s earnings could give investors a solid overview of the financial industry. He’ll also be paying attention to Friday reports from UnitedHealth Group and Delta.
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Artificial intelligence is expected to reshape the wealth management industry — and those who don’t embrace the technology are at risk of falling behind, experts believe. Those in the younger, digitally native generation are now aging and growing their wealth. They expect more digitization and personalization, so wealth management firms are turning to AI to meet those needs, William Blair analyst Jeff Schmitt said in an Oct. 20 note. Despite early skepticism, advisors now realize that AI can be an effective tool in improving their practices and augment — not replace — human interaction, he said. “Wealth managers that are adapting to this changing landscape by implementing and scaling AI technologies are best positioned to capitalize on these demographic trends and should see greater market share gains and profitability in the coming years,” he wrote. Artificial intelligence has been around for several years already within wealth management, with advisors using technology such as machine learning and natural language processing to help analyze data, said Roland Kastoun, U.S. asset and wealth management consulting leader for PwC. Now, that technology combined with generative AI can really help grow productivity and revenue, he said. Already big names such as Morgan Stanley , BlackRock and JPMorgan have all implemented generative AI solutions . “There are going to be opportunities to invest that don’t currently exist,” said Wells Fargo analyst Mike Mayo. “There is one out in the top of the first inning and it is hard to say exactly who wins.” However, on a broad scale he sees JPMorgan as the clear frontrunner right now. “JPMorgan does seem to have the digitization, the data, and the maturity of processes to deploy AI in ways that many others cannot,” Mayo said. They also can attract more talent, which will be key, he added. JPM YTD mountain JPMorgan year to date Meanwhile, Charles Schwab is Schmitt’s top pick for 2024. While he believes the stock is well positioned to outperform due to the potential for a significant earnings rebound, he is also bullish on Schwab’s AI capabilities. The wealth management firm is the largest, with $8 trillion in client assets, and has been using its scale and technology to build artificial intelligence focusing on improving customer service, Schmitt wrote in his note. “While Schwab continues to build out core AI capabilities, we believe this will accelerate over time as it looks to remain an industry leader in customer service levels and pricing,” he said. Among the other names Schmitt also has overweight ratings on are Morgan Stanley, Ameriprise Financial and Envestnet . In September, Morgan Stanley unveiled its generative AI assistant for financial advisors to help “revolutionize” client interactions and bring new efficiencies, the firm said in a memo to staff. Envestnet, the largest provider of wealth-tech solutions for advisors in the U.S., is in the early stages of AI adoption, but has the resources to continue enhancing and scaling its AI capabilities, Schmitt said. Meanwhile, wealth-management company Ameriprise has been working on its AI software over the last few years to streamline operations, augment advisor productivity and boost customer service, Schmitt added. Veteran tech investor Paul Meeks particularly likes BlackRock, which he thinks will benefit as AI pushes more investors into passive investing over active. State Street, Invesco and Schwab can also benefit from that continued shift, he said. The larger institutions, such as Morgan Stanley and Goldman Sachs , will also leverage the technology, said Meeks, a professor at the Baker School of Business at The Citadel. “AI can be used for not only creating an asset allocation for a client and maybe even driving some security selection but also for their marketing,” he said. AI can very inexpensively and efficiently reach a much larger audience, he added. He’s not necessarily jumping into bank stocks right now, however. “When interest rates start to fall, we will get a double whammy — the benefit from the AI trend and the benefit from falling rates,” he said. — CNBC’s Michael Bloom contributed reporting.
Like it or not, generative artificial intelligence has arrived on Wall Street — and experts expect it to transform the way firms do business.
To be clear, artificial intelligence, like natural language processing and machine learning, has been used by wealth management and asset management firms for years. Yet with generative AI now on the scene, it can have a powerful impact when combined with other AI technologies, said Roland Kastoun, U.S. asset and wealth management consulting leader for PwC.
“We see this as a massive accelerator of productivity and revenue growth for the industry,” he said.
In fact, the banking sector is expected to have one of the largest opportunities in generative AI, according to McKinsey & Company. Gen AI could add the equivalent of $2.6 trillion to $4.4 trillion annually in value across the 63 use cases the McKinsey Global Institute analyzed. While not the largest beneficiaries within banking, asset management could see $59 billion in value and wealth management could see $45 billion.
Some of the biggest names in the business are already on board.
Earlier this month, BlackRock sent a memo to employees that in January it will roll out to its clients generative AI tools for Aladdin and eFront to help users “solve simple how-to questions,” the memo said.
“GenAI will change how people interact with technology. It will improve our productivity and enhance the great work we are already doing. GenAI will also likely change our clients’ expectations around the frequency, timeliness, and simplicity of our interactions,” the memo said.
Meanwhile, Morgan Stanley unveiled its generative AI assistant for financial advisors, called AI @ Morgan Stanley Assistant, in September. The firm’s co-President Andy Saperstein said in a memo to staffers that generative AI will “revolutionize client interactions, bring new efficiencies to advisor practices, and ultimately help free up time to do what you do best: serve your clients.”
Earlier this year, both JPMorgan and Goldman Sachs said they were developing ChatGPT-style AI in house. JPMorgan’s IndexGPT will tap “cloud computing software using artificial intelligence” for “analyzing and selecting securities tailored to customer needs,” according to a filing in May. Goldman said its technology will help generate and test code.
Those who don’t embrace AI will be left behind, said Wells Fargo bank analyst Mike Mayo.
“If the bank across the street has financial advisors that are using AI, how can you not be using it too?” he said. “It certainly increases the stakes for competition, and you can keep up or fall behind.”
In fact, as the younger generation ages, those digitally native investors will seek greater digitization, more personalized solutions and lower fees, William Blair analyst Jeff Schmitt said in an Oct. 20 note.
“Given that these investors will control an increasing share of invested assets over time, wealth management firms and advisors are leveraging AI to enhance offerings and adjust service delivery models to win them over,” he wrote.
Cerulli Associates estimated some $72.6 trillion in wealth will be transferred to heirs through 2045.
The big appeal of generative AI — and a differentiator from other AI tech — is its ability to generate content, said PwC’s Kastoun.
It’s one thing for technology to analyze a large set of content, he pointed out. “It’s another thing for it to be able to generate new content based on the data that it has, and that’s what’s creating a lot of hype.”
Yet what he’s seeing in both the wealth management and asset management business is the use of multiple elements of AI, not just generative AI, he said.
“It’s the power of combining these different technologies and methodologies that is really creating an impact across the industry,” Kastoun said.
Firms are now figuring out how to incorporate generative AI into their businesses and existing AI technologies. At T. Rowe Price, its New York City Technology Development Center has been building AI capabilities for several years.
“We ultimately are looking to help our decision makers get the benefit of data and insights to do their job better,” said Jordan Vinarub, head of the center.
His team made a big pivot with the arrival of generative AI.
“We kind of saw this as an existential moment for the firm to say, we need to understand this and figure out how we can use it to support the business,” Vinarub said. “Over the past, I guess, six months … we’ve gone from just pure research and proofs of concept to then building our own internal application on top of the large language model to help assist our investors and research process.”
It’s not only the big firms adapting to generative AI; smaller upstarts are looking for ways to disrupt the industry.
Wealth-tech firm Farther is one of those. Its co-founder, Brad Genser, said the company is a “new type of financial institution” that was built to combine expert advisors and AI.
“If you don’t build the technology, along with the human processes, and you don’t control both, you end up with something that’s incomplete,” he said. “If you do it together, you’re building people processes and technology together, then you get something that’s greater than the sum of its parts.”
Then there is Magnifi, an investing platform that uses ChatGPT and computer programs to give personal investing advice. Investors link the technology to their various accounts, and Magnifi can monitor their portfolios. About 45,000 subscribers have connected over $500 million in aggregate assets to the platform, Magnifi said in November.
“It’s a copilot alongside individual consumers that they’re interacting with over time,” said Tom Van Horn, Magnifi’s chief operating and product officer. “It’s not taking over control, it’s empowering those individuals to get to better wealth outcomes.”
The technology is so fast moving, it’s difficult to know what use cases could exist in the future. Yet certainly as productivity continues to increase, advisors can increase their time and level of engagement with their clients.
“It could change the way we think about a lot of the way we set up our business models,” PwC’s Kastoun said.
It’s also about people working with the technology and not the technology necessarily replacing humans, experts said.
“The dream state is that every employee will have an AI copilot or AI coworker and that each customer will have the equivalent of an AI agent,” Wells Fargo’s Mayo said. “I’m not talking about computers alone. I’m not talking about humans alone, but humans plus AI can compete better than either computers or humans alone.”
— CNBC’s Michael Bloom contributed reporting.
Correction: This article has been updated to reflect that Magnifi said in November that about 45,000 subscribers have connected over $500 million in aggregate assets to the platform. A previous version misstated the amount of assets.
The JPMorgan Chase & Co. headquarters in New York, US, on Friday, July 7, 2023.
Michael Nagle| Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Markets lost momentum Major U.S. indexes mostly slipped Friday, though the Dow Jones Industrial Average bucked the trend to inch up slightly. Asia-Pacific markets dipped Monday. Mainland China’s Shanghai Composite fell around 0.4%, and the yuan weakened marginally, as the People’s Bank of China left its short- and medium-term lending rates unchanged.
Booming profits at JPMorgan JPMorgan Chase’s third-quarter profit surged 35% from a year ago to hit $13.15 billion, while revenue popped 21% to $40.96 billion, surpassing expectations. Net interest income, at $22.9 billion, was 30% higher than the same period in 2022, beating estimates by around $600 million. Shares of the bank climbed 1.5% Friday. Still, CEO Jamie Dimon warned we’re facing “the most dangerous time” in decades.
Hot oil On Friday, prices of both U.S. West Texas Intermediate and Brent crude futures soared more than 5.7% to $87.72 and $90.89 per barrel, respectively. That’s the highest jump in a day for both crude futures since April 3. (Prices remained mostly unchanged during Asia trading hours Monday.) Meanwhile, U.S. oil production hit an all-time high last week, marking a comeback in the domestic industry.
‘Path to a Palestinian state’ U.S. President Joe Biden said in a televised interview Sunday the Palestinian militant group Hamas must be neutralized — but there also “needs to be a path to a Palestinian state.” Separately, China’s Foreign Minister Wang Yireportedly told his Saudi Arabia counterpart Faisal bin Farhan Al Saud that “Israel’s actions have gone beyond self-defense.”
[PRO] All eyes on banks Keep your eye on banks posting results this week — the numbers will provide clues to many aspects of the economy, such as consumers’ strength and whether corporate borrowing and dealmaking are returning. Wall Street banks like Goldman Sachs and Bank of America report earnings Tuesday, followed by regional banks — and Morgan Stanley — on Wednesday.
Going into this earnings season, analysts feared big banks’ income wouldn’t hold up from the previous quarters. Those fears didn’t materialize — for now.
Net interest income, in particular, was higher than expected. That’s the amount banks pocket when they give depositors a low (or zero!) interest rate on their savings, and charge borrowers a high interest rate, usually pegged to the federal funds rate.
Given the high yields on U.S. Treasury and money market funds, analysts thought banks would be forced to shower depositors with higher interest rates, reducing net interest income. That didn’t happen. On the contrary, net interest income rose from a year ago at JPMorgan and Wells Fargo, and beat expectations at Citigroup.
But JPMorgan CEO Jamie Dimon isn’t feeling complacent about that. Dimon acknowledged that his bank’s “over-earning” on net interest income, a benefit that will vanish eventually.
For a preview of that, we don’t have to wait for the following quarters. We just have to look at BlackRock’s third-quarter earnings. Clients pulled their money from BlackRock’s active unit and its index and ETF unit because “for the first time in nearly two decades, clients are earning a real return in cash and can wait for more policy and market certainty before re-risking,” CEO Larry Fink said.
Meanwhile, gold saw its best day of the year on Friday. December futures contracts for the safe-haven metal rose 3.11%, putting it 6.31% higher than its level at the start of 2023. That’s another sign risky assets are losing attractiveness.
It isn’t just investors who are feeling jittery. Outside financial markets, consumer sentiment is slumping, as indicated by the University of Michigan’s survey. But that’s not really a surprise, given the geopolitical shocks and human tragedy unfolding currently.
“The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships,” Dimon said. “This may be the most dangerous time the world has seen in decades.”
The JPMorgan Chase & Co. headquarters in New York, US, on Friday, July 7, 2023.
Michael Nagle | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Markets lost momentum Major U.S. indexes mostly slipped Friday, though the Dow Jones Industrial Average bucked the trend to inch up slightly. Europe’s Stoxx 600 slipped around 1%, weighed by a 2.5% drop in technology stocks. Separately, Mārtiņš Kazāks, one of the European Central Bank’s more hawkish members, told CNBC he was “quite happy” with current rate levels.
Booming profits at JPMorgan JPMorgan Chase’s third-quarter profit surged 35% from a year ago to hit $13.15 billion, while revenue popped 21% to $40.96 billion, surpassing expectations. Net interest income, at $22.9 billion, was 30% higher than the same period in 2022, beating estimates by around $600 million. Shares of the bank climbed 1.5% Friday. Still, CEO Jamie Dimon warned we’re facing “the most dangerous time” in decades.
And at Citigroup and Wells Fargo Citigroup’s net income and revenue for the third quarter were higher than analysts’ expectations, rising 2% and 9% year over year, respectively. Despite that, Citigroup’s shares dipped 0.24% for the day. Meanwhile, Wells Fargo also beat Wall Street estimates. The bank’s third-quarter earnings rocketed 60% and revenue rose 6.5% from a year earlier, boosting its shares by 3.07%.
Hot oil Prices of both U.S. West Texas Intermediate and Brent crude futures soared more than 5.7% to $87.72 and $90.89 per barrel, respectively. That’s the highest jump in a day for both crude futures since April 3. The oil market’s “fraught with uncertainty,” the International Energy Agency said, as the U.S. tightens sanctions against Russian crude exports Thursday and the Israel-Hamas war escalates further.
[PRO] All eyes on banks Keep your eye on banks posting results this week — the numbers will provide clues to many aspects of the economy, such as consumers’ strength and whether corporate borrowing and dealmaking are returning. Wall Street banks like Goldman Sachs and Bank of America report earnings Tuesday, followed by regional banks — and Morgan Stanley — on Wednesday.
Going into this earnings season, analysts feared big banks’ income wouldn’t hold up from the previous quarters. Those fears didn’t materialize — for now.
Net interest income, in particular, was higher than expected. That’s the amount banks pocket when they give depositors a low (or zero!) interest rate on their savings, and charge borrowers a high interest rate, usually pegged to the federal funds rate.
Given the high yields on U.S. Treasury and money market funds, analysts thought banks would be forced to shower depositors with higher interest rates, reducing net interest income. That didn’t happen. On the contrary, net interest income rose from a year ago at JPMorgan and Wells Fargo, and beat expectations at Citigroup.
But JPMorgan CEO Jamie Dimon isn’t feeling complacent about that. Dimon acknowledged that his bank’s “over-earning” on net interest income, a benefit that will vanish eventually.
For a preview of that, we don’t have to wait for the following quarters. We just have to look at BlackRock’s third-quarter earnings. Clients pulled their money from BlackRock’s active unit and its index and ETF unit because “for the first time in nearly two decades, clients are earning a real return in cash and can wait for more policy and market certainty before re-risking,” CEO Larry Fink said.
Meanwhile, gold saw its best day of the year on Friday. December futures contracts for the safe-haven metal rose 3.11%, putting it 6.31% higher than its level at the start of 2023. That’s another sign risky assets are losing attractiveness.
It isn’t just investors who are feeling jittery. Outside financial markets, consumer sentiment is slumping, as indicated by the University of Michigan’s survey. But that’s not really a surprise, given the geopolitical shocks and human tragedy unfolding currently.
“The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships,” Dimon said. “This may be the most dangerous time the world has seen in decades.”
A Goldman Sachs Group Inc. logo hangs on the floor of the New York Stock Exchange in New York, U.S., on Wednesday, May 19, 2010.
Daniel Acker | Bloomberg | Getty Images
Investors have piled into short-term U.S. government bonds in a bid to wait out the upheaval caused by a blowout in longer-term yields, according to a Goldman Sachs executive.
An auction this week of 52-week Treasury bills at a 5.19% rate was 3.2 times oversubscribed, its highest demand of the year, said Lindsay Rosner, head of multi-sector investing at Goldman Sachs asset and wealth management.
“They’re saying, ‘I’m now being afforded a lot more yield in the very front end of the curve in government paper’,” Rosner told CNBC in a phone interview, referring to 1-year T-bills. “That is really where you’re seeing investors flock.”
The trade is a key way that institutions and wealthy investors are adjusting to the surge in long-term interest rates that have roiled markets lately. The 10-year Treasury yield has been climbing for weeks, reaching a 16-year high of 4.89% Friday after the September jobs report showed that employers were still hiring aggressively. Investors poured more than $1 trillion into new T-bills last quarter, according to Bloomberg.
The playbook, according to Rosner, takes advantage of the presumption that interest rates will be higher for longer than markets had expected earlier this year. If that sentiment holds true, longer-duration Treasuries like the 10-year should offer better yields next year as the yield curve steepens, she said.
“You get to collect a 5% coupon for the next year,” she said. “Then, in a year, you may have opportunities [in longer-duration Treasuries] at greater than 5% in government securities or potentially in [corporate bonds] that are now properly priced.
“You could then get a double-digit yield, but be confident about valuation, unlike now,” she added.
While 10-year Treasuries have crashed in recent weeks, other fixed income instruments including investment-grade and high-yield bonds haven’t fully reflected the change in rate assumptions, according to Rosner. That makes them a bad deal for the moment, but could create opportunities down the road.
The upheaval that’s punished holders of longer-dated Treasuries in recent weeks has professional managers reducing the average duration of their portfolios, according to Ben Emons, head of fixed income at NewEdge Wealth.
“Treasury bills are in high demand,” he said. “Anyone out there who needs to manage duration in their portfolio, you do that with the 1-year T bill. That’s what BlackRock is doing, it’s what I’m doing.”
The U.S. Court of Appeals for the D.C. Circuit has paved the way for bitcoin exchange-traded funds.
On Tuesday, the court sided with Grayscale in a lawsuit against the Securities and Exchange Commission which had denied the company’s application to convert the Grayscale Bitcoin Trust to an ETF. The decision could impact other companies that want to create bitcoin ETFs, like BlackRock and Fidelity.
A spot bitcoin ETF would be traded through a traditional stock exchange, although the bitcoin would be held by a brokerage, and would allow investors to gain exposure to the world’s biggest cryptocurrency without having to own the coin themselves. Many crypto bulls believe that approval of a spot bitcoin ETF will lead to more mainstream institutional adoption.
Bitcoin, ether and other major cap crypto coins surged on the news, and Coinbase, which is listed as the custodian partner in multiple spot bitcoin ETF applications, was up more than 14% on Tuesday.
“The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said, referring to exchange-traded products. “In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful.”
Grayscale Investments, which manages the world’s biggest crypto fund, initiated its lawsuit against the SEC in June 2022 after the agency rejected its application to turn its flagship bitcoin fund, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.
The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about possible market manipulation and investor protections.
“We are reviewing the court’s decision to determine next steps,” the SEC said in a statement.
A spokeswoman for Grayscale called Tuesday’s ruling “a monumental step forward for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper.”
“The Grayscale team and our legal advisors are actively reviewing the details outlined in the Court’s opinion and will be pursuing next steps with the SEC. We will share more information as soon as practicable,” continued the written statement.
One expert says the SEC’s enforcement action is basically dead in the water.
“The bottom line is that while the SEC can try to take the case to the Supreme Court, they have no other avenue to deny Grayscale’s application,” said Renato Mariotti, a former federal prosecutor in the Securities and Commodities Fraud Section of the United States Attorney’s Office — and now a trial partner in Chicago with Bryan Cave Leighton Paisner.
“If the SEC changed their rationale for denying their application, it would appear even more arbitrary. The SEC already put their best argument forward, and the Court of Appeals rejected it,” continued Mariotti.
Castle Island Venture’s Nic Carter agrees, adding that while the SEC can go back and try to deny the application on different grounds, the best next step is for the agency “to accept the decision as a way to ‘save face’ and allow the spot ETF in a way that shows they disagree with the decision but respect the court’s ruling.”
CoinRoutes CEO, Dave Weisberger, tells CNBC it could even net SEC Chairman Gary Gensler a political win — a spot bitcoin ETF would grant the regulator some oversight of the bitcoin spot market even though the token is not considered a security.
GBTC, which has $16 billion in assets under management as of Tuesday, was the first crypto product investors could trade in their brokerage accounts to get exposure to bitcoin. It was launched in 2013, well before the approval of bitcoin ETFs in Canada or bitcoin futures ETFs in the U.S. Grayscale charges a 2% annual fee to investors, making it a cash cow for parent company Digital Currency Group, led by Barry Silbert.
“It virtually guarantees they will approve BlackRock and Fidelity,” said Dave Weisberger, CEO of CoinRoutes, a platform that provides algorithmic trading and consolidated market data products for digital assets across multiple exchanges and liquidity providers. “Grayscale may need to refile, but they will almost certainly be approved as well.”
Firms have been applying for spot bitcoin ETFs for more than two years, but so far, the SEC has denied more than 30 proposals since 2021 — a 100% rejection rate. But investor sentiment was buoyed in June when BlackRock, the world’s largest asset manager with some $9 trillion in assets under management, put in an application. The firm has had all but one of its previous 575 ETF applications accepted.
Amin H. Nasser, president and CEO of Saudi Aramco, speaks during a news conference at the Plaza Conference Center in Dhahran, Saudi Arabia November 3, 2019.
Hamad Mohammed | Reuters
BlackRock said Monday that Amin Nasser, the CEO of Saudi Aramco, the world’s largest oil company, is joining the asset manager’s board of directors.
The world’s largest asset manager said the move reflects the firm’s emphasis on the Middle East as part of its long-term strategy. BlackRock had more than $8 trillion in client assets under management as of 2022.
“Amin’s distinguished career at Aramco, spanning more than four decades, gives him a unique perspective on many of the key issues facing our firm and our clients,” Larry Fink, chairman and CEO of BlackRock, said in a statement.
“His leadership experience, understanding of the global energy industry and the drivers of the shift towards a low carbon economy, as well as his knowledge of the Middle East region, will all contribute meaningfully to the BlackRock Board dialogue,” Fink added.
Nasser has held the top position at Aramco since 2015. He oversaw the public listing of the oil company in 2019. In 2021, Aramco announced its proposal to achieve net-zero gas emissions by 2050.
BlackRock has been at the forefront of the financial industry’s adoption of environmental, social and corporate governance guidelines and strategies. The firm, which sells a number of “sustainable” funds, has come under fire for its fossil fuel investments, becoming a political punching bag with both Democrats and Republicans criticizing its ESG policies.
In August 2022, Texas Comptroller Glenn Hegar targeted BlackRock, putting the asset manager on a list of financial companies that “boycott energy companies.”
In December, Florida’s chief financial officer Jimmy Patronis said the Sunshine State’s treasury would begin divesting $2 billion of assets managed by BlackRock. “Using our cash… to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for,” he said in a statement at the time. “It’s got nothing to do with maximizing returns and is the opposite of what an asset manager is paid to do.”
Fink previously said that asset managers like BlackRock are not “the environmental police,” but it is the firm’s fiduciary duty to give investors access to the best and most complete information to make their financial investment decisions, and that includes climate data.
“As I have said consistently over many years now, it is for governments to make policy and enact legislation, and not for companies, including asset managers, to be the environmental police,” Fink wrote in his annual letter.
One of Blackrock’s popular ESG exchange-traded funds, iShares ESG Aware MSCI USA ETF, has nearly $15 billion in assets under management.
Victoria Greene, G Squared Private Wealth and Scott Wren, Wells Fargo Investment Institute Senior Global Market Strategist, join CNBC’s Leslie Picker and ‘Closing Bell Overtime’ to talk the day’s market action.
BlackRock, the world’s largest asset manager, has filed an application for a spot bitcoin exchange-traded fund.
There are currently no such products in the U.S. The SEC approved several bitcoin BTCUSD futures-based ETFs in the past, but has yet to greenlight anything that is backed by bitcoin itself.
