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Tag: debt

  • U.S. stocks end lower, but Nasdaq posts longest weekly win streak since February

    U.S. stocks end lower, but Nasdaq posts longest weekly win streak since February

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    U.S. stocks closed lower on Friday as investors focused on debt-ceiling talks in Washington D.C., which Republican Rep. Garret Graves of Louisiana, a deputy for House Speaker Kevin McCarthy, said were on pause. The Dow Jones Industrial Average
    DJIA,
    -0.33%
    ended about 109 points lower Friday, or 0.3%, near 33,426, but booked a 0.4% weekly gain. So did the other major U.S. indexes. The S&P 500 index
    SPX,
    -0.14%
    closed 0.2% lower, while booking a 1.6% weekly gain. The Nasdaq Composite Index
    COMP,
    -0.24%
    shed 0.2% Friday, but gained 3% for the week to advance for a fourth week in a row, its longest weekly stretch of wins since February 3, according to Dow Jones Market Data. Focus on Friday also was on regional banks after CNN reported that Treasury Secretary Janet Yellen said more mergers in the sector might be needed.

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  • Ray Dalio says debt-ceiling debate sets stage for ‘disastrous financial collapse’

    Ray Dalio says debt-ceiling debate sets stage for ‘disastrous financial collapse’

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    “‘Increasing the debt limit the way Congress and presidents have repeatedly done, and most likely will do this time around, will mean there will be no meaningful limit on the debt. This will eventually lead to a disastrous financial collapse.‘ ”


    — Ray Dalio, founder, Bridgewater Associates

    That’s billionaire investor and Bridgewater Associates founder Ray Dalio, warning via a post on LinkedIn that while the U.S. government is likely to avoid a first-ever debt default, a lack of effective restraint on spending spells big trouble ahead.

    Dalio wrote that he doesn’t expect the battle between the Biden administration and congressional Republicans over a debt-limit increase to lead to a default — or if it does, it will be resolved quickly. But any agreement is unlikely to deal with the “big issues” in a substantive way, and will instead likely tweak things in ways that won’t matter much, making no real commitment to cutting the deficit in future years.

    See: Debt-ceiling standoff: Here’s what could go into a bipartisan deal

    House Speaker Keven McCarthy, R-Calif., told reporters Thursday that he thinks an eventual bill to raise the borrowing limit needs to be on the House floor next week and that he can “see the path.” McCarthy and President Joe Biden have designated representatives to negotiate a deal while Biden is attending a G-7 meeting in Japan.

    Both have said they are confident a deal will be reached before the government is unable to pay its bills, which could come as early as June 1. Debt-ceiling worries have made for volatile trading in short-term Treasury bills that would be affected by a potential default, but concerns have yet to exert lasting pressure on the stock market.

    The Dow Jones Industrial Average
    DJIA,
    +0.34%
    rose 115.14 points, or 0.3%, on Thursday, while the S&P 500
    SPX,
    +0.94%
    rallied 0.9% to close at a nearly nine-month high.

    Read: ‘Doomsday machine’: Here’s what could happen if the debt ceiling is breached

    Dalio argues that continuing along the same path isn’t sustainable “because increasing debt assets and liabilities faster than income eventually makes it impossible to simultaneously pay lender-creditors a high enough real (i.e., inflation-adjusted) interest rate to have them hold the debt assets without having that real interest rate too high for the borrower-debtors to be able to service their debts.”

    When the amount of debt sold is greater than what debt buyers want to absorb, central banks must decide whether to let interest rates rise to balance the supply and demand, which will crush debtors and the economy, or print money to buy the debt. The latter option is inflationary and encourages debtholders to sell, making the debt imbalance worse.

    “In either case that creates a debt crisis that is like the runs on the banks that we have been seeing, but with government bonds being what is sold and the run on the bank being a run on the central bank,” Dalio wrote.

    At the same time. not increasing the debt limit will lead to default and to cutbacks on basics for those who can’t afford cutbacks, causing financial havoc and social upheaval, Dalio said.

    An agreement to raise the limit would ideally be accompanied by an agreement between Biden and McCarthy that overcomes the objections of the “more extreme” members of both parties, Dalio wrote, who either don’t want to lift the debt ceiling or aren’t willing to compromise on a long-term budget approach.

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  • Philadelphia Fed’s factory gauge shows ninth straight month of declining activity in May

    Philadelphia Fed’s factory gauge shows ninth straight month of declining activity in May

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    The numbers: The Philadelphia Federal Reserve said Thursday its gauge of regional business activity rose to negative 10.4 in May from negative 31.3 in the prior month. Any reading below zero indicates deteriorating conditions. This is the ninth straight negative reading and the eleventh in the last twelve months. 

    Economists polled by the Wall Street Journal expected a negative 20 reading in May.

    Key details: The barometer on new orders increased 13.8 points but remained at negative 8.9 in May. The shipments index rose slightly to negative 4.7.  The measure on six-month business outlook worsened to negative 10.3 in May from negative 1.5 in the prior month.

    Big picture: The continued contraction in activity is a sign that U.S. manufacturing continues to struggle.

    The Philadelphia Fed index is closely followed to give economists an advance signal of factory conditions across the country.

    The national ISM manufacturing index has been in contractionary territory for six months.

    Earlier this week, the similar Empire State survey released by the New York Fed showed manufacturing activity plummeted 42.6 points to negative 31.8 in May. 

    Market reaction: Stocks
    DJIA,
    -0.23%

    SPX,
    +0.05%
    were set to open mixed on Thursday. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.627%
    rose to 3.62%.

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  • Dow ends over 300 points lower, loses grip on gains for the year

    Dow ends over 300 points lower, loses grip on gains for the year

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    U.S. stocks closed lower on Tuesday, with losses deepening into the closing bell and the Dow losing its grip on gains for the year. The Dow Jones Industrial Average
    DJIA,
    -1.01%
    closed about 336 points lower, or 1%, ending near 33,012, according to preliminary FactSet figures. The S&P 500
    SPX,
    -0.64%
    shed 0.6% and the Nasdaq Composite Index
    COMP,
    -0.18%
    closed 0.2% lower, with all three indexes ending near the session lows. Stocks were under pressure as President Joe Biden was set to meet with four top U.S. lawmakers for talks on raising the federal government’s borrowing limit, with a goal of avoiding a market-shaking U.S. default. The White House Tuesday afternoon said Biden might cut short an overseas trip to deal with the debt-ceiling talks. For the year, the Dow was down 0.4% through Tuesday, while the S&P 500 was still up 7% and the Nasdaq was 17.9% higher, according to FactSet.

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  • Why Biden Caved

    Why Biden Caved

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    The White House and Congress have not made much progress in their talks to avert an unprecedented, and potentially calamitous, national default that could occur as soon as early June. But on the most fundamental point of dispute, President Joe Biden has already caved: He’s negotiating with Republicans over the debt ceiling.

    For months, the president’s ironclad position has been that the debt ceiling is not a bargaining chip. No longer would Democrats allow Republicans to hold hostage the nation’s creditworthiness and economic prestige. Paying the government’s bills by raising the U.S.’s statutory borrowing limit would be nonnegotiable. As recently as Friday, White House Press Secretary Karine Jean-Pierre declared without equivocation, “We are not going to negotiate over the debt limit.”

    But Biden himself has dropped the pretense that his weeks-long budget discussions with the GOP have not revolved around the debt ceiling. Asked specifically about the debt ceiling on Sunday—in anticipation of a second White House visit by congressional leaders, planned for today—Biden told reporters, “Well, I’ve learned a long time ago, and you know as well as I do: It never is good to characterize a negotiation in the middle of a negotiation.”

    Read: This debt crisis is not like 2011’s. It’s worse.

    So there you go: It’s a negotiation. Exactly what the two parties are discussing is only starting to become clear. According to various reports, a deal to avert default could include some changes to permitting rules that would speed up domestic-energy production; a revocation of unused COVID funds; additional work requirements for some federal programs (although the president has ruled out any modifications to Medicaid); and, most significant, a cap on overall federal spending.

    The Biden administration still claims to be haggling only over the budget, not the debt ceiling. “The president has been emphasizing for months that he’s eager to have budget negotiations,” a White House official, who requested anonymity to explain the administration’s somewhat tortured position, told me. “That’s of course different from avoiding default, which is nonnegotiable.”

    Biden’s no-negotiation stance was born of past experience, when in 2011 Republicans dragged out debt talks with the Obama administration to the brink of default, resulting in a downgrade of the U.S.’s credit rating. But Biden’s approach this time is proving to be neither realistic nor sustainable, especially after Speaker Kevin McCarthy defied expectations last month by getting a budget-slashing debt-ceiling bill through his narrow House majority.

    Crucially, Biden failed to win strong support for his strategy from House centrists. Democrats had been hoping to persuade Republicans representing swing districts to buck McCarthy and help pass a debt-ceiling increase. But those lawmakers have stuck by the speaker. Complaining about a lack of outreach from the White House, they instead criticized Biden over his refusal—until recently—to negotiate. With Republicans unwilling to budge, Democratic centrists began to lose patience with Biden’s approach and conducted their own bipartisan negotiations.

    “We believe it’s very important in general that both sides sit down and try to work this out,” Representative Josh Gottheimer of New Jersey, the Democratic co-chair of the bipartisan Problem Solvers Caucus, told me before Biden’s first meeting last week with McCarthy and other top congressional leaders. “This can’t become a part of a political back-and-forth as the country drives off the cliff.”

    Read: “We used to be called moderate. We are not moderate.”

    Last month the Problem Solvers offered their own plan, which they presented as a fallback option that could win bipartisan support should Biden and McCarthy fail to strike a deal in time. The proposal would immediately suspend the borrowing limit through the end of the year to buy time for broader budget talks. If Congress agrees to unspecified budget limits and creates a fiscal commission to tackle the nation’s long-term deficits and debt, the plan stipulates that the debt ceiling would be increased through the 2024 elections.

    The compromise has yet to gain momentum, but its release seemed to undermine the Biden administration’s insistence that Democrats would not tie a debt-ceiling increase to spending reforms. “We didn’t try to fill in every blank, but we thought this was a really good framework to become the meat of the deal,” Representative Scott Peters of California, a Democrat who helped write the Problem Solvers plan, told me.

    It could still prove handy. Biden struck an optimistic note on Sunday, telling reporters, “I really think there’s a desire on [Republicans’] part, as well as ours, to reach an agreement, and I think we’ll be able to do it.” But McCarthy is sounding more dour. “I still think we’re far apart,” he told NBC News yesterday morning. The speaker said that Biden “hasn’t taken it serious” and warned that an agreement needed to happen by this weekend in order for the House and Senate to have time to debate and pass it by early June.

    Whether a Biden-McCarthy deal could even get through the House is also in question. Democrats have largely stayed quiet on Biden’s evident capitulation to Republicans, and the talks initially did not stir a backlash. But that may be changing as the president openly considers concessions that would be anathema to progressives, such as the possibility of adding work requirements to social safety-net programs. Still, the lack of a credible primary challenge to Biden’s reelection has helped give him room to negotiate, as Democrats fret about the effect that a default could have on the president’s already tenuous public standing.

    “As long as he continues to try to avoid default, and avoid the middle class having to pay the cost for it, then he’s in the position that the majority of the electorate wants him to be,” Jesse Ferguson, a longtime Democratic strategist, told me.

    McCarthy has much more to worry about. He traded away his own job security to win the speakership in January, agreeing to rule changes that would make it easier for hard-right conservatives to depose him. A debt-ceiling deal that fails to secure deep enough spending cuts or policy concessions from Democrats could threaten his position. “Default can be avoided. The question is whether Kevin McCarthy could withstand putting that bill on the floor,” Ferguson said.

    The speaker has secured no substantive commitments from Biden, nothing specific that he can sell to his party. But McCarthy has elicited one major concession from the president, which serves as a prerequisite for any others to come. Biden has come to the table with default in the balance, and he’s negotiating on the GOP’s terms.

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    Russell Berman

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  • Inflation Now Forcing Consumers Into Bankruptcy

    Inflation Now Forcing Consumers Into Bankruptcy

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    More consumers are forced to seek bankruptcy protection so they can afford basic living expenses


    COLUMBUS, Ohio, May 15, 2023 (Newswire.com)
    –
    Inflation is forcing many into bankruptcy. Now that the pandemic financial support systems are gone, bankruptcy is becoming the next refuge for consumers who cannot pay basic living expenses due to inflation. Bankruptcy specialist Richard West, Ohio bankruptcy lawyer, explains why inflation is now becoming a leading cause of personal bankruptcy.

    “The historical reasons for filing bankruptcy have remained unchanged for decades,” according to attorney Richard West, a top filer of bankruptcy cases in Columbus, Ohio. The reasons have been:

    • Medical
    • Job Loss
    • Credit Card debt
    • Divorce
    • Unexpected expenses

    “Having filed personal bankruptcy cases in Ohio for over 35 years, I am now seeing more bankruptcy cases caused by inflation,” explains West. “In Ohio, consumers who were making ends meet are now being forced into bankruptcy for no reason other than inflation. This is unprecedented,” West states. People who are drowning in debt need to explore bankruptcy sooner, rather than later.

    “Inflation contributes to personal bankruptcy in several ways,” says West. Here are a few examples:

    • Increased Cost of Living: Inflation increases the cost of essential goods and services, making it difficult or impossible for you to afford your basic living expenses. This leads to increased borrowing and more debt, and often, to filing for bankruptcy.
    • Reduced Purchasing Power: Inflation reduces your purchasing power, making it difficult or impossible to pay for even basic needs. This is especially frightening for anyone on a fixed income or those who have had their hours cut back at work. 
    • Higher Interest Rates: Inflation has resulted in dramatic increases in the interest rate you pay for all of your credit purchases. This, in turn, makes it harder to pay down your balances. 
    • Inability to pay down your balances. This means more of your money goes to interest, making less available for living expenses.

    Historically, inflation was considered, at most, an incidental factor in forcing people into bankruptcy. All that is changing, according to West: “Inflation by itself is now ‘tipping the scales’ for some families, forcing them to choose between paying for basic living expenses and paying down debt.”

    All of the traditional factors that force consumers to consider bankruptcy remain, but are now amplified by inflation, which causes many to go from “treading water” to drowning in debt.  Bankruptcy is becoming the new “social safety net” for consumers being squeezed beyond their ability to keep their finances under control.

    How to fight back against inflation

    “As a 35-year veteran consumer bankruptcy attorney, I counsel people who feel embarrassed to seek my advice,” says West. If you are unable to reduce the debt significantly in a reasonable amount of time, it’s wise to consider bankruptcy. With the proper guidance, you can recover your credit in as little as a year after discharging debt.

    Source: DebtFreeOhio

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  • Consumer sentiment tumbles to six-month low in May on renewed fears about U.S. economy

    Consumer sentiment tumbles to six-month low in May on renewed fears about U.S. economy

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    The numbers: The University of Michigan’s gauge of consumer sentiment fell to a preliminary May reading of 57.7 from an April reading of 63.5. That is the lowest level since November last year.

    Economists polled by the Wall Street Journal had expected a May reading of 63.

    Americans view on near-term inflation moderated slightly in May. They now expect the inflation rate in the next year to average about 4.5%. Inflation expectations had surged to 4.6% in April from 3.6 in March.

    Inflation expectations over the next five years rose to 3.2% from 3% in April. That’s the highest reading since 2011.

    Key details: A gauge that measures what consumers think about their financial situation — and the current health of the economy — fell to 64.5 from 68.2 in April.

    Another measure that asks about expectations for the next six months moved down to 53.4 in May from 60.5 in the prior month.

    Big picture: Consumer spending is the engine of the economy. If households grow concerned about the outlook and pull back, it could push the economy into recession.

    And Federal Reserve officials won’t be pleased to see expectations of inflation over the long-term increase. They view expectations as a key source of future inflation pressure.

    What UMich said: “Consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff,” the press release said. In the most serious debt-ceiling standoff in 2011 consumer sentiment plummeted to recession levels but recovered quickly when the crisis was averted.

    What are they saying? “While we don’t place too much weight on the relationship, if sustained, the latest plunge in consumer sentiment would be consistent with falling consumption in the second quarter. That would be alongside the probable hit to consumption from tightening credit conditions,” said Olivia Cross, assistant economist at Capital Economics.

    Market reaction: Stocks
    DJIA,
    -0.18%

    SPX,
    -0.22%
    were lower in volatile trading on Friday while the yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.437%
    rose to 3.41%.

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  • Dow posts 4-day decline as regional-bank woes resurface

    Dow posts 4-day decline as regional-bank woes resurface

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    U.S. stocks ended mostly lower on Thursday, with the Dow booking a fourth day in a row of losses, as selling pressures returned to shares of regional banks. The Dow Jones Industrial Average
    DJIA,
    -0.66%
    shed about 221 points, or 0.7%, ending near 33,310, according to preliminary FactSet data. The S&P 500 index
    SPX,
    -0.17%
    fell about 0.2%, while the Nasdaq Composite Index
    COMP,
    +0.18%
    closed 0.2% higher. Disappointing earnings from Disney Co.
    DIS,
    -8.73%
    tied to its streaming business helped drag down the blue-chip Dow, while shares of PacWest Bancorp
    PACW,
    -22.70%
    fell more than 20% after it disclosed a 9.5% decline in deposits in recent weeks. Short-term rates remained volatile on Thursday as investors hoped for progress on the debt-ceiling stalemate in Washington D.C. The 2-year Treasury
    TMUBMUSD02Y,
    3.891%
    was pegged at 3.906%, up four of the past five trading days, according to Dow Jones Market Data. The 6-month Treasury bill was at 5.11%.

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  • U.S. April producer prices rise 2.3% over past year, smallest increase since January 2021

    U.S. April producer prices rise 2.3% over past year, smallest increase since January 2021

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    The numbers: U.S. producer prices rose 0.2% in April, the Labor Department said Thursday.

    Economists polled by the Wall Street Journal had forecast the PPI would rise 0.3%.

    In the 12 months through April, the PPI increased 2.3%. It follows a 2.7% gain in March. This is the lowest rate since January 2021.

    Key…

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  • How to Craft a Values-Aligned Investment Offering | Entrepreneur

    How to Craft a Values-Aligned Investment Offering | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Mainstream business investment advice usually tells us this: A business owner seeking investment capital should go out and look for investors, then once they’ve decided they’d like to invest, those investors set the terms of the offering.

    What does this mean for the business owner over the next five to 10 years? Often, it means the owner has little to no control over what their own business looks like and that they are beholden to the terms set out by the people holding the purse strings.

    If you are a business owner and this sounds unappealing to you, I have good news: Business owners can 100% set their own investment terms — defining how the investment is structured and what the relationship looks like — then go out and find the values-aligned investors who believe in their business and want to help it grow.

    What’s the catch? Well, for Option B to work for you, you need to put in the work to create your own outside-the-box investment offering. That means building the knowledge, team and expertise to structure the right investment offering for your unique goals, values, plans and projections.

    Fortunately, I specialize in just this kind of work, and in this article, I am going to share with you the basic information you need to know to get started on this process.

    Related: Funding Your Values-Based Business: How to Clarify Your Goals and Values in Preparation for Fundraising

    Defining “investment”

    “Investment” is a vague term that simply means someone is giving someone else money with the expectation that, by some means, they will get their money back, plus some extra on top. Investments can happen in several ways: An investor could lend business money, which is called a debt investment.

    They could buy a piece of the company, which is called an equity investment. Or they could buy some kind of a convertible instrument that starts as one thing and then later converts into something else. It’s important to define the terms of the investment people are making in your company.

    Who should define the terms of the investment?

    Given that there are so many ways to structure an investment (literally an infinite number of ways), who should decide what the investment terms will be? To be honest, I’m always surprised by how many entrepreneurs will talk to investors without having clarity about the terms they’re offering and are willing to accept.

    I think it’s because business owners are often told not to worry about the terms because the investor will decide how they will invest in your business. But that’s not a very good idea because the way someone invests in your business has a huge effect on the likelihood of success of your business, the likelihood that you’re going to have a good long-term relationship with your investors and whether the entire partnership goes smoothly or goes off the rails.

    I believe the investment terms should be determined by the company founders, not by an investor, because the founders know best what will be most aligned with their vision, mission and goals. This is why I work with my clients to create their own investment offerings, designed to fit exactly what is right for the company.

    Related: Stop Competing on Price — Compete on Value

    Debt vs. Equity

    One fundamental decision to make about the type of investment you’re going to offer is whether it will be a debt or equity investment. With a debt investment, someone is lending you money you agree to pay back with interest. Pros of a debt investment include that it can be easier to document and understand; investors may perceive it as less risky as debt repayment typically takes priority over payments to equity investors; and you don’t give up any ownership of your company. Cons of a debt investment include that it can look bad on your balance sheet and therefore prevent you from getting other loans; it must be paid back to prevent a default; and payments generally can’t be delayed for too long, or there is a risk that the IRS could recharacterize it as equity.

    An equity investment means an investor is purchasing an ownership interest in your company. Equity must be “priced,” meaning you and the investor agree upon a certain dollar amount per share of your company in what is known as a “priced round.” If you are not planning on a venture capital-type investment dependent on a future sale at a higher valuation than the investor bought in, the value you set is not that important.

    Pros of equity investments include that equity generally doesn’t have to be repaid, and it looks good on a balance sheet. Cons of equity investing include that you are giving away some rights of your company, and equity investing can be more complicated to document and understand.

    The standard venture capital investment model is a type of equity investing that, in my opinion, is not right for most businesses. Yet many lawyers and business financial consultants recommend it as a one-size-fits-all approach. With the venture capital model, an investor buys a piece of your company at a certain price with the expectation that within five to seven years, you will sell the company to a larger company for at least ten times the value. It is quite difficult for most companies to grow that fast in that short of a time, so pretty much every aspect of the company must be dedicated to rapid growth at all costs following this type of investment.

    However, there are many other ways to structure an appealing equity investment offer that does not require the sale of the company for the investors to get paid.

    Related: Investors Can Safeguard Their Money By Focusing on One Crucial Step

    Defining terms

    If you’ve ever raised money or looked into raising money, you’ve probably heard about “term sheets.” A term sheet defines the details of an investment, including the investor’s right to receive payments and the investor’s voting rights, if any. While a term sheet is not required to seek investments, it is a useful tool when raising money outside the VC model because it enables you to describe exactly what an investor will get when they invest in your business.

    Once you’ve decided between equity and debt, you can describe the details in the term sheet.

    You’ll want to decide whether to offer dividends for an equity investment. Dividends are a way investors can get paid without you selling your company. Dividends are paid to investors when a company becomes profitable. Once the company starts to become profitable, some of the profits are paid out to investors in the form of dividends.

    Another element to consider including in an equity term sheet is a “liquidation preference.” A liquidation preference outlines what happens if you sell the company or go out of business. There are many ways to structure a liquidation preference, and you can decide what you want that to look like: What would the investors get in the case of a sale? What would you get? For example, I have some clients who don’t want to be pressured to sell their company, so they set up the liquidation preference to say that if they were ever to sell the company, the investor could only get back what they originally put in and nothing more — discouraging the investor from pressuring the founder to sell.

    A third thing to consider putting into an equity term sheet is “redemption options.” This is another way someone can exit from their investment without you having to sell the company. Redemption happens when someone who has made an equity investment in your company exits from the investment by selling their stock, or equity, back to the company. Again, there are many ways to structure it so you can buy the investor out over time.

    If you decide to offer debt, there are also lots of options. For example, you can structure a revenue-based debt instrument that provides for a quarterly payment to your investors that varies based on your company’s revenues.

    If you decide to offer a convertible instrument, it is up to you what triggers the conversion, e.g., from debt to equity. For example, maybe the conversion happens when your business reaches a certain level of gross revenue.

    These are just a few of the terms you can consider including in your term sheet and which ones you choose, and the details of the provisions will be determined by your specific situation.

    Related: 6 Steps to Finding the Right Investors for Your Business

    What investors want

    While the technicalities of what you offer an investor are critical, values-aligned investors also typically have other considerations when determining whether to invest in your business. For example, your ideal investors will want to support the outcomes or impact your company is having, whether on your community, employees or the planet.

    Investors may also be looking at the risk involved with the investment — how likely they feel they are to get their money back. If an investor knows you and believes in your capabilities and dedication to the company, they may be more likely to invest (they may be tired of investing in faceless Wall Street companies whose managers often seem to care more about short-term profits than the long-term interests of their investors and other stakeholders).

    When speaking to potential investors, first make sure that they are values-aligned and passionate about your company’s mission. Once that is established, show them your customized term sheet and explain the thinking behind it. Your investors will likely be impressed that you took the time to design your investment terms based on your plans, goals and values rather than pulling a cookie-cutter document off the shelf. If you’ve taken the time to design your terms thoughtfully in a way that creates the greatest likelihood of the long-term sustainability of your company, a reasonable return for investors, and a positive impact on people and the planet, there will be investors who will enthusiastically say yes.

    In conclusion

    A lot more could be said about crafting an appealing values-aligned investment offering, but it all boils down to putting in the work to define what you want out of the investment and design terms that align your goals with those of your investors while being realistic about what is possible. Once you have your customized term sheet, you can begin to connect with values-aligned investors with confidence.

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    Jenny Kassan

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  • Biden describes debt-ceiling meeting as ‘productive,’ but McCarthy says he ‘didn’t see any new movement’

    Biden describes debt-ceiling meeting as ‘productive,’ but McCarthy says he ‘didn’t see any new movement’

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    House Speaker Kevin McCarthy on Tuesday said he “didn’t see any new movement” toward ending Washington’s standoff over the debt ceiling, as he assessed how a much-anticipated meeting on the issue went.

    President Joe Biden hosted the meeting at the White House with the country’s four top lawmakers, and beforehand analysts had predicted it would not result in a deal.

    McCarthy…

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  • Debt-ceiling deal not looking likely yet as Biden meets with McCarthy and other lawmakers

    Debt-ceiling deal not looking likely yet as Biden meets with McCarthy and other lawmakers

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    As President Joe Biden prepares to host a much-anticipated meeting on the U.S. debt ceiling with the country’s four top lawmakers, analysts are predicting there won’t be a deal yet on this issue.

    If the meeting at the White House, scheduled for around 4 p.m. Eastern time Tuesday, were to conclude with an agreement, that would be very surprising, said Chris Krueger, managing director at TD Cowen’s Washington Research Group, in a note on Tuesday.

    The…

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  • Dow, S&P 500 book 4-day losing streak as banking shares drag down stocks

    Dow, S&P 500 book 4-day losing streak as banking shares drag down stocks

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    U.S. stocks closed lower for a fourth session in a row on Thursday as pressure on shares of banking stocks continued to weigh on equities. The Dow Jones Industrial Average DJIA fell about 286 points, or 0.9%, ending near 33,127, according to preliminary FactSet figures. The S&P 500 index SPX fell 0.7% and the Nasdaq Composite Index COMP slumped 0.5%. That marked the S&P 500’s longest losing streak since since Feb. 22, according to Dow Jones Market Data, and the longest losing stretch since Dec. 19 for the Nasdaq. Pressure in the U.S. banking sector has been a key focus for investors, with shares of the SPDR S&P Regional…

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  • ECB not ready to ‘pause’ rate hikes as inflation fight continues, Lagarde says

    ECB not ready to ‘pause’ rate hikes as inflation fight continues, Lagarde says

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    The European Central Bank on Thursday lifted interest rates by 25 basis points, slowing the pace of tightening as it delivered a seventh straight increase, indicating it’s not ready to press the pause button.

    “We are not pausing,” ECB President Christine Lagarde told reporters at a news conference, adding that the stance was “very clear.”

    The increase lifted the ECB’s main rate to 3.25%, near a 15-year high.

    “The inflation outlook continues to be too high for too long,” the ECB Governing Council said in a statement at the conclusion of its policy meeting.

    “Headline inflation has declined over recent months, but underlying price pressures remain strong. At the same time, the past rate increases are being transmitted forcefully to euro area financing and monetary conditions, while the lags and strength of transmission to the real economy remain uncertain,” the ECB said.

    Lagarde told reporters that the lending survey informed the decision to lift rates by a quarter point rather than a half point. She said there was a strong consensus behind the quarter-point move, while acknowledging some policy makers had preferred a half-point hike.

    The euro
    EURUSD,
    -0.38%
    initially slumped after the statement, but rebounded sharply to trim a loss versus the U.S. dollar after Lagarde said the ECB wasn’t prepared to pause the rate-hiking cycle. The euro was down 0.2% at $1.1035 after trading as low as $1.1003. The euro has rallied 3% versus the dollar so far in 2023.

    European government bond yields were also lifted after Lagarde ruled out a pause. The yield on the 10-year German government bond
    TMBMKDE-10Y,
    2.242%    ,
    or bund, was up around a half of a basis point at 2.289%.

    The ECB move comes after the Federal Reserve on Wednesday delivered a 10th consecutive rate increase, but signaled that it was prepared to hold off on further tightening depending on incoming economic and financial data. Asked if the ECB could continue on a tightening path if the U.S. central bank paused, Lagarde dismissed the notion that ECB decisions were “dependent” on the Fed.

    Market participants, meanwhile, have priced in three Fed rate cuts by year-end. The ECB, in contrast, was expected to deliver further monetary tightening.

    Inflation in the eurozone continued to run at a 7% year-over-year clip in April, roughly in line with market expectations, but a modest acceleration from March. Core inflation, excluding food, energy, alcohol and tobacco, ticked down a tenth to 5.6% from 5.7%.

    A slowing eurozone economy, however, has bolstered arguments for bringing the monetary tightening cycle to an end, economists said. The ECB’s bank lending survey released Tuesday showed a tightening in conditions, with the largest tightening in credit standards for the last two quarters since the sovereign debt crisis.

    The ECB in March shrugged off worries about the banking sector, delivering a half-point rate hike but signaling that future decisions would be made on a meeting-by-meeting basis, abandoning a longstanding policy of “forward guidance” aimed at massaging market expectations around future rate moves.

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  • Debt-ceiling standoff: Here’s what’s next, as U.S. faces potential default on June 1

    Debt-ceiling standoff: Here’s what’s next, as U.S. faces potential default on June 1

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    A divided Washington is making a little progress toward raising the debt ceiling and avoiding a U.S. default, but the endgame still isn’t clear.

    Here’s what looks likely to come next, as a White House meeting among key players is planned for May 9 — and June 1 looms as a possible deadline.

    Biden aims for May 9 talks after Yellen’s warning

    The…

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  • Dow ends 367 points lower, stock fall ahead of Fed rate decision

    Dow ends 367 points lower, stock fall ahead of Fed rate decision

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    U.S. stocks closed lower on Tuesday, but were well off the session’s lows, a day before the Federal Reserve could be poised to fire off its last interest rate hike of this cycle. The Dow Jones Industrial Average DJIA shed about 367 points, or 1.1%, ending near 33,684, according to preliminary FactSet figures. The S&P 500 index SPX shed 1.2%, while the Nasdaq Composite Index COMP closed 1.1% lower. Regional bank stocks were hammered on Tuesday, a day after JPMorgan Chase & Co. won an auction for the assets of the failed First Republic Bank. The SPDR S&P Regional Bank ETF KRE closed down 6.4% on Tuesday. U.S. crude oil…

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  • Aussie dollar, bond yields surge after central bank’s surprise rate hike

    Aussie dollar, bond yields surge after central bank’s surprise rate hike

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    Australian government bond prices plunged and the country’s currency surged after the central bank surprised markets on Tuesday with another rate hike.

    The Reserve Bank of Australia raised its benchmark borrowing costs by 25 basis points to 3.85% after traders had expected no move.

    The RBA said inflation, which is running at an annual rate…

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  • US Treasury says government may default on debt as early as June

    US Treasury says government may default on debt as early as June

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    A letter from US Treasury Secretary Janet Yellen warns of potential ‘harm to business and consumer confidence’.

    United States Treasury Secretary Janet Yellen has sent a letter to Republican House Speaker Kevin McCarthy warning him that the federal government could hit its spending limit by June 1 if Congress does not raise the debt ceiling.

    In the letter published on Monday, Yellen said available data points to early June as the period when the government will no longer be able to cover its expenses should Congress fail to raise the limit before then.

    “Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments,” the letter reads.

    Though Yellen’s letter indicates the US could enter default as early as June 1, the treasury secretary also noted that it is “impossible to predict with certainty the exact date when Treasury will be unable to pay the government’s bills”.

    Monday’s letter comes as US President Joe Biden reportedly called for a May 9 meeting with Democratic and Republican leaders to discuss spending and the debt limit.

    Experts have warned that a possible default would have dire impacts on the US economy: It could cause the US’s credit rating to fall, leading to higher interest rates and a possible recession.

    Raising the US spending limits is a largely routine procedure but one that has become increasingly contentious in recent years. To raise the debt ceiling this year, Republicans in Congress are pushing for steep cuts to social programmes in exchange for their support.

    The Biden administration has called for an increase to the debt ceiling without conditions, stating that debates over various programmes can be hashed out during negotiations on the yearly budget.

    His concerns were echoed by fellow Democrats in the aftermath of Yellen’s letter, who called for a “clean” debt limit increase without haggling or addendums.

    “We have about a month until the U.S. defaults on paying its debt. Let’s be clear — this isn’t new spending,” Virginia Senator Mark Warner tweeted on Monday. “This is about paying bills we’ve already incurred. We cannot unleash economic catastrophe on the American people.”

    Last week, the Republican-led House of Representatives passed a bill that agreed to raise the debt ceiling by $1.5 trillion in exchange for $4.5 trillion in spending cuts for programmes like healthcare for low-income communities, renewable energy and transportation.

    The bill is considered dead on arrival in the Democrat-controlled US Senate, and Biden has stated that he would veto it. But its passage in the House is considered a victory for McCarthy, who has since called for Democrats to “do their job” to approve the bill and avoid a default.

    “In our history, we have never defaulted on our debt or failed to pay our bills,” White House Press Secretary Karine Jean-Pierre said in a statement following the vote.

    “President Biden will never force middle class and working families to bear the burden of tax cuts for the wealthiest, as this bill does. The President has made clear this bill has no chance of becoming law.”

    On Monday, the Congressional Budget Office also stated that it saw an increased risk of the government running out of funds by early June due to tax receipts that were lower than expected.

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  • Stock-market investors want the Fed to answer this crucial question when it meets this week

    Stock-market investors want the Fed to answer this crucial question when it meets this week

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    Multiple risks are raising the stakes in financial markets and for the U.S. economy as Federal Reserve policy makers prepare to gather this week.The Fed is widely expected to deliver a quarter-of-a-percentage point interest rate hike when its meeting concludes on Wednesday. The most crucial question facing investors is whether policy makers subsequently show a willingness to hold off on further rate rises in order to assess the damage from their year-long campaign to lower inflation.

    If they do pause, it may be time for investors…

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  • What is a credit-default swap? Debt-ceiling jitters put obscure instrument back in spotlight.

    What is a credit-default swap? Debt-ceiling jitters put obscure instrument back in spotlight.

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    It’s usually not a good sign when obscure financial instruments are making headlines. And that’s the case now as the political standoff over the U.S. government’s debt ceiling puts credit-default swaps back in the spotlight.

    How CDS work

    Credit-default swaps, or CDS, are instruments that effectively allow a lender to insure against default by a borrower. An investor who owns a corporate bond, bank credits or government debt, can buy CDS to protect against default. Speculators can also use CDS to place bets, though…

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