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  • Former Theranos COO sentenced to nearly 13 years | CNN Business

    Former Theranos COO sentenced to nearly 13 years | CNN Business

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    CNN Business
     — 

    Ramesh “Sunny” Balwani, the former chief operating officer of failed blood testing startup Theranos, was sentenced Wednesday to nearly 13 years in prison for fraud. It marks an end to the stunning downfall of a high-flying Silicon Valley company that resulted in the rare convictions of two tech executives.

    “There is an unfortunate saying in Silicon Valley: ‘Fake it ‘til you make it.’ Elizabeth Holmes and Sunny Balwani stretched this idea to a place much farther than the law allows and in so doing put vast amounts of investor dollars at risk,” said Stephanie Hinds, US Attorney for the Northern District of California, in a statement. “Significantly, today the court also made clear that Sunny Balwani’s decision to deceive doctors and patients also put the health of patients at risk. Ms. Holmes and Mr. Balwani now will be justly punished for their illegal conduct.”

    Hinds added, “Let this story be a cautionary tale for entrepreneurs in this district: Those who use lies to cover up the shortfalls of their promised accomplishments risk substantial jail time.”

    The sentencing comes weeks after Elizabeth Holmes, the founder of Theranos and Balwani’s ex-girlfriend, was sentenced to more than 11 years in prison.

    Theranos raised $945 million from an A-list cohort of investors with its promise to test for a wide range of conditions using just a few drops of blood. At its peak, the company was valued at $9 billion.

    The company began to unravel after a Wall Street Journal investigation in 2015 reported that Theranos had only ever performed roughly a dozen of the hundreds of tests it offered using its proprietary technology, and with questionable accuracy. It also came to light that Theranos was relying on third-party manufactured devices from traditional blood testing companies rather than its own technology. Theranos ultimately dissolved in September 2018.

    Holmes and Balwani were first indicted together four years ago on the same 12 criminal charges pertaining to defrauding investors and patients about Theranos’ capabilities and business dealings in order to get money. Their trials were severed after Holmes indicated she intended to accuse Balwani of sexually, emotionally and psychologically abusing her throughout their decade-long relationship, which coincided with her time running the company. (Balwani’s attorneys have denied her claims.)

    In July, Balwani was found guilty on all 12 charges he faced, which included ten counts of federal wire fraud and two counts of conspiracy to commit wire fraud. Holmes was found guilty in January on four charges relating to defrauding investors, and found not guilty on three additional charges concerning defrauding patients and one charge of conspiracy to defraud patients.

    Like Holmes, Balwani faced up to 20 years in prison as well as a fine of $250,000 plus restitution for each count.

    In a recent court filing, prosecutors noted that Balwani was convicted not only of defrauding investors but also defrauding patients. They recommended a 15-year prison sentence for him, as well as an order for Balwani to pay $804 million in restitution. In a separate filing, attorneys for Balwani requested a sentence of probation, noting he had no criminal history.

    Before joining Theranos, Balwani had a career as a software executive. Balwani, nearly 20 years older than Holmes, first met her in 2002 before she dropped out of Stanford. He served as an informal adviser to Holmes in Theranos’ earliest days and the two became romantically involved. Balwani guaranteed a “multimillion-dollar loan” to the startup in 2009, court filings show, and took on a formal role as president and chief operating officer. Holmes and Balwani largely kept their romantic relationship hidden while working together.

    During her trial, Holmes claimed Balwani tried to control nearly every aspect of her life — including disciplining her eating, her voice and image, and isolating her from others. She testified that while he didn’t control her interactions with investors, business partners and others, “he impacted everything about who I was, and I don’t fully understand that.”

    Holmes is expected to appeal her conviction but was ordered to turn herself into custody on April 27, 2023.

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  • US trade deficit edged up to $78.2 billion in October | CNN Business

    US trade deficit edged up to $78.2 billion in October | CNN Business

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    New York
    CNN Business
     — 

    The US trade gap edged only slightly higher in October than the month before, to $78.2 billion.

    The latest reading was up just 5.4%, less than half the pace of increase from the revised September reading, when the trade deficit jumped by 12.7% to $74.1 billion.

    A strong dollar and weaker global demand weighed on exports both months. A strong dollar makes US goods more expensive to foreign buyers and it also makes imports more affordable for US buyers. But economic slowdowns in overseas markets also hit US exports in the most recent readings.

    The latest report shows exports fell 0.7% in October compared to the month before, and are down nearly 2% from the record exports set in August. Most of the drop was in the export of goods, rather than services, which fell 4.4% compared to August.

    Oil prices have come down since earlier this year, according to data released in the report. The average price of crude oil imports in the month was $82.05 a barrel, down 5.7% from September, and down 21.7% from the peak in June.

    But the United States now exports more petroleum products, by dollars, than it imports. So a lower price of crude no longer helps the trade deficit the way it might have done in the past, when crude and petroleum product imports vastly exceeded exports.

    The deficit in the movement of goods between the United States and China narrowed significantly in the latest report, falling 22.6% to $28.9 billion from $37.3 billion, one factor in the smaller trade gap increase.

    Although most of that narrowing was due to a 31.3% jump in the export of US goods to China, compared to September, a 9.5% decline in US imports of Chinese goods was also a factor in the smaller trade deficit between the two countries.

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  • Dow tumbles 500 points but could actually end the year in the green | CNN Business

    Dow tumbles 500 points but could actually end the year in the green | CNN Business

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    New York
    CNN Business
     — 

    Most of 2022 has been pretty dismal for investors, and Monday was no exception: The Dow fell about 500 points, or 1.5%, Monday.

    Still, the stock market remains in the midst of one heck of a fourth-quarter rally. The Dow enjoyed its best month in nearly a half-century in October and it’s up nearly another 3% in November. The-chip index is down only about 7% for 2022 — and just 8% below its all-time high.

    It would be a stunning comeback if the Dow reclaims all its lost ground and finishes the year in positive territory. As recently as mid-October the Dow was in bear-market territory for 2022, down more than 21%.

    What’s happened? Top industrial stocks in the Dow such as Boeing

    (BA)
    , Caterpillar

    (CAT)
    and Honeywell

    (HON)
    have surged. So have shares of retail/consumer giants Walgreens

    (WBA)
    , Home Depot

    (HD)
    and Nike

    (NKE)
    , as well as leading financials Goldman Sachs

    (GS)
    and JPMorgan Chase

    (JPM)
    .

    The S&P 500 and Nasdaq are still pretty deep in the red for 2022, off 17% and almost 30% respectively. Both indexes were down more than 1.5% Monday. But even those indexes have rebounded sharply from their year-to-date lows in recent weeks.

    There are a few factors at play. First, there’s a growing sense that the Federal Reserve might be done with the most significant portion of its massive rate hikes. Inflation seems to be peaking.

    And there are hopes that the US economy will either experience a so-called soft landing or just a mild recession. If that were to happen, consumer spending may not fall off a cliff. Neither would corporate profits. That would be good for stocks.

    Still, some market watchers wonder if the explosive market rebound of the past few weeks has gone too far too fast. Are investors suddenly too giddy? The CNN Business Fear & Greed index, which measures seven indicators of market sentiment, is now showing signs of Greed and is moving closer to Extreme Greed levels.

    But others believe the market rebound may be warranted, especially for stocks that conservative investors love — such as companies that pay healthy dividend yields.

    “We think stocks could stabilize. Inflation seems to be cooperating. So far earnings are too,” said John Augustine, chief investment officer with Huntington Private Bank. “But we favor income over growth.”

    Augustine said investors should “nibble” at the market as opposed to jumping headfirst into riskier stocks. He noted that the S&P Dividend ETF

    (SDY)
    , which owns high-yielding companies such as VF Corp

    (VFC)
    . (owner of The North Face and Vans), IBM

    (IBM)
    and 3M

    (MMM)
    , is actually up 1% this year.

    Some analysts are warning that the broader market selling may not be over, however.

    “I see a lot of similarities to the downturn of 2000. There were several times when the stock market came back and then went back down,” said John Duffy, co-founder of Trending Stocks.

    Following the bursting of the tech bubble in 2000, stocks traded in a fairly tight range for nearly three years and the Nasdaq lagged the Dow and S&P 500 by a wide margin. That could happen again.

    Duffy said he’d also be wary of consumer stocks given continued concerns about the economy and the eventual impact of rate hikes. But he thinks energy stocks could be more resilient, and that industrials and materials stocks are also attractive.

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  • China markets tank as protests erupt over Covid lockdowns | CNN Business

    China markets tank as protests erupt over Covid lockdowns | CNN Business

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    Hong Kong
    CNN Business
     — 

    China’s major stock indices and its currency have opened sharply lower Monday, as widespread protests against the country’s stringent Covid-19 restrictions over the weekend roiled investor sentiment.

    Hong Kong’s Hang Seng

    (HSI)
    Index fell as much as 4.2% in early trading. It has since pared some losses and last traded 2% lower. The Hang Seng

    (HSI)
    China Enterprises Index, a key index that tracks the performance of mainland Chinese companies listed in Hong Kong, lost 2%.

    In mainland China, the benchmark Shanghai Composite briefly fell 2.2%, before trimming losses to 0.9% lower than Friday’s close. The tech-heavy Shenzhen Component Index dropped 1.1%.

    The Chinese yuan, also known as the renminbi, plunged against the US dollar on Monday morning. The onshore yuan, which trades in the tightly controlled domestic market, briefly weakened 0.9%. It was last down 0.6% at 7.206 per dollar. The offshore rate, which trades overseas, dropped 0.3% to 7.212 per dollar.

    The plunging yuan suggests that “investors are running ice cold on China,” said Stephen Innes, managing partner of SPI Asset Management, adding that the currency market might be “the simplest barometer” to gauge what domestic and overseas investors think.

    The markets tumble comes after protests erupted across China in an unprecedented show of defiance against the country’s stringent and increasingly costly zero-Covid policy.

    In the country’s biggest cities, from the financial hub of Shanghai to the capital Beijing, residents gathered over the weekend to mourn the dead from a fire in Xinjiang, speak out against zero-Covid and call for freedom and democracy.

    Such widespread scenes of anger and defiance, some of which stretched into the early hours of Monday morning, are exceptionally rare in China.

    Asian markets were also broadly lower. South Korea’s Kospi lost 1%, Japan’s Nikkei 225

    (N225)
    shed 0.6%, and Australia’s S&P/ASX 200 fell by 0.3%.

    US stock futures — an indication of how markets are likely to open — fell, with Dow futures down 0.5%, or 171 points. Futures for the S&P 500 were down 0.7%, while futures for the Nasdaq dropped 0.8%.

    Oil prices also dropped sharply, with investors concerned that surging Covid cases and protests in China may sap demand from one of the world’s largest oil consumers. US crude futures fell 2.7% to trade at $74.19 a barrel. Brent crude, the global oil benchmark, lost 2.6% to $81.5 per barrel.

    On Friday, a day before the protests started, China’s central bank cut the amount of cash that lenders must hold in reserve for the second time this year. The reserve requirement ratio for most banks (RRR) was reduced by 25 percentage points.

    The move was aimed at propping up an economy that had been crippled by strict Covid restrictions and an ailing property market. But analysts don’t think the move will have a significant impact.

    “Cutting the RRR now is just like pushing on a string, as we believe the real hurdle for the economy is the pandemic rather than insufficient loanable funds,” said analysts from Nomura in a research report released Monday.

    “In our view, ending the pandemic [measures] as soon as possible is the key to the recovery in credit demand and economic growth,” they said.

    Innes from SPI Asset Management said China’s economy is currently caught in the midst of a tug-of-war between weakening economic fundamentals and increasing reopening hopes.

    “For China’s official institutions, there are no easy paths. Accelerating reopening plans when new Covid cases are rising is unlikely, given the low vaccination coverage of the elderly,” he said. “Mass protests would deeply tilt the scales in favor of an even weaker economy and likely be accompanied by a massive surge in Covid cases, leaving policymakers with a considerable dilemma.”

    In the near term, he said, Chinese equities and currency will likely price in “more significant uncertainty” around Beijing’s reaction to the ongoing protests. He expects social discontent could increase in China over the coming months, testing policymakers’ resolve to stick to its draconian zero-Covid mandates.

    But in the longer term, the more pragmatic and likely outcome should be “a quicker loosening of [Covid] restrictions once the current wave subsides,” he said.

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  • Hong Kong finds 90-year-old cardinal guilty over pro-democracy protest fund | CNN

    Hong Kong finds 90-year-old cardinal guilty over pro-democracy protest fund | CNN

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    Hong Kong
    CNN
     — 

    A 90-year-old former bishop and outspoken critic of China’s ruling Communist Party was found guilty Friday on a charge relating to his role in a relief fund for Hong Kong’s pro-democracy protests in 2019.

    Cardinal Joseph Zen and five others, including the Cantopop singer Denise Ho, contravened the Societies Ordinance by failing to register the now-defunct “612 Humanitarian Relief Fund” that was partly used to pay protesters’ legal and medical fees, the West Kowloon Magistrates’ Courts ruled.

    The silver-haired cardinal, who appeared in court with a walking stick, and his co-defendants had all denied the charge.

    The case is considered a marker of political freedom in Hong Kong during an ongoing crackdown on the pro-democracy movement, and comes at a sensitive time for the Vatican, which is preparing to renew a controversial deal with Beijing over the appointment of bishops in China.

    Outside the court, Zen told reporters that he hoped people wouldn’t link his conviction to religious freedom.

    “I saw many people overseas are concerned about a cardinal being arrested. It is not related to religious freedom. I am part of the fund. (Hong Kong) has not seen damage (to) its religious freedom,” Zen said.

    Zen and four other trustees of the fund – singer Ho, barrister Margaret Ng, scholar Hui Po Keung, and politician Cyd Ho – were sentenced to fines of HK$4,000 ($510) each.

    A sixth defendant, Sze Ching-wee, who was the fund’s secretary, was fined HK$2,500 ($320).

    All had initially been charged under the controversial Beijing-backed national security law for colluding with foreign forces, which carries a maximum penalty of life imprisonment. Those charges were dropped and they instead faced a lesser charge under the Societies Ordinance, a century-old colonial-era law punishable with fines of up to HK$10,000 ($1,274) but not jail time for first-time offenders.

    The court heard in September that the legal fund raised the equivalent of $34.4 million through 100,000 deposits.

    In addition to providing financial aid to protesters, the fund was also used to sponsor pro-democracy rallies, such as paying for audio equipment used in 2019 during street protests to resist Beijing’s tightening grip.

    Although Zen and the other five defendants were spared from being charged under the national security law, the legislation imposed by Beijing over Hong Kong in June 2020 in a bid to quell the protests has repeatedly been used to curb dissent.

    Since the imposition of the law, most of the city’s prominent pro-democracy figures have either been arrested or gone into exile, while several independent media outlets and non-government organizations have been shuttered.

    The Hong Kong government has repeatedly denied criticism that the law – which criminalizes acts of secession, subversion, terrorism, and collusion with foreign forces – has stifled freedoms, claiming instead it has restored order in the city after the 2019 protest movement.

    Hong Kong’s prosecution of one of Asia’s most senior clergyman has cast the relationship between Beijing and the Holy See into sharp focus.

    Zen has strongly opposed a controversial agreement struck in 2018 between the Vatican and China over the appointment of bishops. Previously both sides had demanded the final say on bishop appointments in mainland China, where religious activities are heavily monitored and sometimes banned.

    Born to Catholic parents in Shanghai in 1932, Zen fled to Hong Kong with his family to escape looming Communist rule as a teenager. He was ordained as a priest in 1961 and made Bishop of Hong Kong in 2002, before retiring in 2009.

    Known as the “conscience of Hong Kong” among his supporters, Zen has long been a prominent advocate for democracy, human rights and religious freedom. He has been on the front lines of some of the city’s most important protests, from the mass rally against national security legislation in 2003 to the “Umbrella Movement” demanding universal suffrage in 2014.

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  • Opinion: ‘Africa’s COP’ made some big promises. Here’s how to deliver | CNN

    Opinion: ‘Africa’s COP’ made some big promises. Here’s how to deliver | CNN

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    Editor’s Note: Adjoa Adjei-Twum. She is the Founder & CEO of the Africa-focused and UK-based advisory firm Emerging Business Intelligence and Innovation (EBII) Group for global investors interested in Africa and emerging markets.
    The opinions expressed in this article are solely hers.



    CNN
     — 

    The recently-concluded COP27 was dubbed the “African COP” – with the continent center stage in the global effort to fight the causes and effects of climate change.

    As negotiations in the Egyptian resort of Sharm el-Sheikh spilled over into the weekend, there was a significant breakthrough on one of the most fractious elements – creating a fund to help the most vulnerable developing nations hit by climate disasters.

    The backdrop for COP27 was a series of catastrophic global weather events including record-breaking floods in Pakistan and Nigeria, the worst droughts in four decades in the Horn of Africa, and severe European heatwaves and hurricanes in the US.

    The loss and damage fund – to pay for the sudden impacts of climate change which are not avoided by mitigation and adaptation – has been a major obstacle in COP talks.

    The richest, most polluting nations have been reluctant to agree to a deal, worried that it could put them on the hook for costly legal claims for climate disasters.

    I welcome progress here, as African nations are bearing the brunt of climate change. The continent contributes around 3% of global greenhouse gas emissions, according to the UN Environment Programme and the International Energy Agency (IEA).

    Climate change is estimated to cost the continent between $7bn and $15bn a year in lost economic output or GDP, rising to $50bn a year by 2030, according to the African Development Bank (AfDB).

    But my joy is muted – the devil is in the detail, as ever. As an African diaspora entrepreneur whose work focuses significantly on the impact of climate change on the risk profile of African financial institutions and nations, I am concerned about the lack of detail about how the fund would work, when it will be implemented, and the timescale. I fear these could take years.

    During a recent visit to the US, I discussed reparation money with US Democrat Congresswoman Rep. Ilhan Omar. She said it was important for the US and other countries to make heavy investments, which could come in the form of reparations.

    She spoke about the importance of consulting impacted communities in Africa to avoid exploitation and the need for countries such as the US and China to end fossil fuel expansion and phase out existing oil, gas, and coal in a way that is “fair and equitable.”

    Adaptation is Africa’s big challenge – the AFDB estimates that the continent needs between $1.3 to $1.6 trillion by 2030 to adapt to climate change.

    The bank’s Africa Adaptation Acceleration Program, in partnership with the Global Center on Adaptation (GCA), aims to mobilize $25bn in finance for Africa, for projects such as weather forecasting apps for farmers and drought-resistant crops.

    It is now time for African nations to levy a climate export tax on commodities, such as cocoa and rubber, to help pay for climate adaptation. But it still falls short of the money Africa needs.

    Adaptation is all about building resilience and capacity, and I believe our governments, banks, and businesses must also adapt.

    I am calling on our governments, institutions, and companies to boost efforts to attract green finance and make Africa more resilient by improving governance, tax systems, anti-corruption efforts, and legal compliance.

    Sustainability is not a business tax, it is essential for business survival. Only companies focused on the changing world around us – from regulation to consumer and investor attitudes – will survive the climate crisis.

    Businesses that ignore this can expect fines, boycotts, and limited access to funding. Banks will suffer too. So the financial sector must be better prepared and more agile.

    This message will be reinforced when I meet CEOs, banking executives, and Nigeria’s central bank at the 13th Annual Bankers’ Committee Retreat, organized by the Nigerian Bankers Committee, in Lagos next month. The aim is to support the country’s biggest banks as they navigate new international sustainability rules.

    Increasingly, investment funds must conform to green taxonomies – a system that highlights which investments are sustainable and which are not. In other words, banks will only support investments by institutions in G20 countries if they conform to national or supranational rules, such as the European Union’s Green Taxonomy.

    This will not only help tackle greenwashing but also help companies and investors make more informed green choices. Additionally, G20 countries are asking their banks to forecast how risky their loans are due to climate change.

    African nations must implement robust systems to mobilize private capital and foreign direct investment in key sectors. Governments must ensure they have an enabling environment for increased green investments.

    Regulators must strengthen their capacity to develop and effectively enforce climate-related rules. Companies, especially banks, should strengthen climate risk management teams, regulatory compliance expertise, and preparation of bankable projects for international climate finance. This is the foundation for a successful transition to a low–carbon economy.

    Looking ahead, there are other actions we can take. The African Continental Free Trade Area (AfCFTA) – the world’s largest free trade area and single market of almost 1.3bn people – could protect Africa from the adverse impacts of climate change, such as food insecurity, conflict, and economic vulnerability.

    It could lead to the development of regional and continental value chains, inter-Africa trade deals, job creation, security, and peace. A single market could drive less energy-intensive economic growth while keeping emissions low, for example by developing regional energy markets and manufacturing hubs.

    But we need much better pan-Africa coordination, like the European Union, to accelerate the AfCFTA. I urge our governments to work together and take swift and concrete actions to ensure the full and effective implementation of the AfCFTA. There is no time to waste.

    This will not be popular with some African regimes because they will be forced to be more transparent and accountable with their public finances.

    This year’s COP may have been marred by chaos, rows between rich and poorer nations, and broken multi-billion-dollar pledges by developed countries who created the climate crisis.

    Many observers point out the final deal did not include commitments to phase down or reduce the use of fossil fuels.

    But, the deal to create a pooled fund for countries most affected by climate change is significant, and as UN secretary general António Guterres warned, it was no time for finger-pointing.

    It is also no time for the blame game. It is a wake-up call for African governments, banks, institutions, and companies to unite, step up, and adapt to a new climate reality.

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  • GOP-led states press Supreme Court to keep Biden student debt forgiveness on hold | CNN Politics

    GOP-led states press Supreme Court to keep Biden student debt forgiveness on hold | CNN Politics

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    CNN
     — 

    A collection of Republican-led states argued on Wednesday that the Supreme Court should keep President Joe Biden’s student debt forgiveness policy on hold while the litigation around it plays out, pointing to fact that the Biden administration has extended its pause on student loan payments.

    The Republican states, which have already obtained an appeals court order blocking the implementation of the controversial program, said the extension showed that there would be no harm inflicted by the court order being left in place.

    “The Department [of Education] can point to no emergency or imminent harm because, just yesterday, the agency extended the payment pause on student loans until the summer of 2023,” they wrote in the new filing.

    Federal student loan payments were set to resume in January after a years-long pandemic pause. But the Biden administration said Tuesday that it is extending the pause until 60 days after the pending litigation over the forgiveness program is resolved. If the program has not been implemented and the litigation has not been resolved by June 30, payments will resume 60 days after that.

    The Wednesday filing by the states came in response to a request from the Biden administration that the Supreme Court lift the hold that has been placed on the student debt relief program, which would forgive up to $20,000 in loans for individual borrowers who earned less than $125,000 in either 2020 or 2021.

    The Republican states accused the Biden administration of relying “on the COVID-19 pandemic” as “a pretext to mask the President’s true goal of fulfilling his campaign promise to erase student-loan debt.”

    The policy was set to begin going into effect earlier this fall, but was blocked by the 8th US Circuit Court of Appeals in a lawsuit brought by Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina.

    They claim that in rolling out the program, Department of Education Secretary Miguel Cardona went beyond the authority he has under law to cancel individual debts. They also argue that the department violated administrative law in how it launched the policy.

    The states defended the appeals court order blocking the relief program, telling the Supreme Court on Wednesday that they will suffer the types of harm that make it appropriate for a court to intervene.

    This procedural threshold – known as standing – has been a legal obstacle for many opponents of the program who have tried to block it in court, including challengers whose requests for Supreme Court intervention were previously denied. The states in the new filing argue that they’ll suffer a loss of tax revenue and other kinds of injuries if the debt relief program goes into effect.

    The states also pointed to the ruling from a federal judge in Texas in a separate case that struck down the student debt relief policy, which the administration has appealed to the 5th US Circuit Court of Appeals. That ruling will remain in effect even if the Supreme Court lifts the hold placed by the 8th Circuit, the states noted in their filing Wednesday.

    The Biden administration has indicated it will take that case to the Supreme Court as well if the 5th Circuit leaves in place the ruling striking it down.

    In the request it put before the Supreme Court, US Solicitor General Elizabeth Prelogar argued that leaving the program on hold “leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations.”

    Prelogar told the Supreme Court that the program was a lawful endeavor “to ensure that borrowers affected by a national emergency are not worse off in relation to their student loans.”

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  • The Fed offers more clues about rate hikes | CNN Business

    The Fed offers more clues about rate hikes | CNN Business

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    New York
    CNN Business
     — 

    Americans are getting ready for food, family and football on Thursday, but investors were still holding off until Wednesday afternoon before starting to give thanks.

    That’s because the Federal Reserve released the minutes from its latest meeting at 2pm ET Wednesday, which provided more clues about the central bank’s thinking on inflation and interest rate hikes.

    At its November 2 meeting the Fed raised rates by three-quarters of a percentage point — its fourth straight hike of such a large magnitude. But Fed chair Jerome Powell suggested at a press conference that the Fed may soon begin to slow the pace of hikes.

    The minutes from that meeting showed that several other Fed policymakers agreed with Powell’s assessment.

    “A number of participants observed that, as monetary policy approached a stance that was sufficiently restrictive to achieve the Committee’s goals, it would become appropriate to slow the pace of increase in the target range for the federal funds rate,” the Fed said in the minutes.

    The Fed added that “a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.”

    Stocks, which were relatively flat and meandering before the minutes came out, popped after their release. The Dow ended the day up more than 95 points, or 0.3%. The S&P 500 jumped 0.6% and the Nasdaq rose 1%.

    Other Fed members, most notably vice chair Lael Brainard, had also hinted n recent speeches at a slower pace of hikes. Yet there have been confusing signals from other Fed officials, who have continued to stress that inflation isn’t going away and must be brought under control.

    To that end, the Fed said in the minutes that inflation remains “stubbornly high” and “more persistent than anticipated.”

    With that in mind, traders are now pricing in a more than 75% chance that the Fed will raise rates by only a half-point at its December 14 meeting, according to futures contracts on the CME. That’s up from odds of 52% for a half-point hike a month ago, but lower than an 85% likelihood of a half-point increase that was priced in just last week.

    A recent batch of inflation reports seem to suggest that the pace of runaway price increases is finally starting to slow to more manageable levels. The job market remains relatively healthy as well, although the most recent jobless claims figures ticked up from a week ago.

    But as long as the labor market remains firm and inflation pressures continue to ebb, the Fed will likely pull back on the magnitude of its rate hikes.

    Some experts are growing concerned that if the Fed goes too far with rates, the increases could eventually slow the economy too much and potentially lead to much higher unemployment, job losses and even a recession.

    The Fed’s rate hikes have had a clear impact on the housing market, with surging mortgage rates helping to put a dent into home sales.

    Still, Wall Street is growing more confident that the Fed might be able to pull off a so-called soft landing. The Dow soared 14% in October, its best month since January 1976. The Dow is up another 4.5% in November and is now only down 6% this year.

    The S&P 500 and Nasdaq also have rebounded significantly since October, but both of those broader market indexes remain down more sharply for the year than the Dow.

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  • Consumers continue to lack confidence in the US economy ahead of holiday shopping season | CNN Business

    Consumers continue to lack confidence in the US economy ahead of holiday shopping season | CNN Business

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    Minneapolis
    CNN Business
     — 

    Heading into the all-important holiday shopping season, American consumers still aren’t feeling very confident about the state of the US economy.

    The University of Michigan’s consumer sentiment index landed at 56.8 in November, up from the preliminary reading of 54.7 measured earlier this month but lower than the 59.9 recorded in October.

    Economists were expecting a reading of 55, according to consensus estimates on Refinitiv.

    The month-over-month decline in sentiment offset about one-third of the gains made since the index bottomed out in June, according to Joanne Hsu, director of the university’s Surveys of Consumers.

    “Headwinds to consumer strength have started to emerge. Strong incomes have thus far helped consumers, particularly lower-wage workers, cope with high inflation,” Hsu said in a statement. “However, their perceptions of weakening labor markets could make them pull back their spending in the future. Wealthier households are experiencing declining stock markets and home values, which would also produce drag on their willingness to spend.”

    Consumers surveyed also highlighted the effects of rising interest rates on their desire to buy homes, cars and other big-ticket items. The Federal Reserve, in efforts to combat decades-high inflation, has enacted a series of steep interest rate hikes.

    About 83% of respondents to the University of Michigan’s Surveys of Consumers said that it was a bad time to buy a home. That’s the highest share ever recorded, according to the university.

    The survey also showed that consumers’ inflation expectations for this year and five years out remained relatively unchanged at 4.9% and 3%, respectively. This is a key data point for the Federal Reserve. If consumers believe prices will remain high, that could factor into increased wage demands, which could cause businesses to raise prices.

    Earlier this month, when the preliminary survey data was released, Hsu noted that very few consumers were front-loading purchases to avoid higher interest rates in the future. That was an indication that expectations aren’t worsening, she stated at the time.

    Still, Hsu noted Wednesday, uncertainty over these expectations remains at an elevated level, “indicating that the general stability of these expectations may not necessarily endure.”

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  • Biden extends student loan repayment freeze as forgiveness program is tied up in courts | CNN Politics

    Biden extends student loan repayment freeze as forgiveness program is tied up in courts | CNN Politics

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    CNN
     — 

    The Biden administration is yet again extending the pause on federal student loan payments, a benefit that began in March 2020 to help people who were struggling financially due to the Covid-19 pandemic.

    The extension comes as the Biden administration’s student loan forgiveness program is tied up in the courts. Officials had told borrowers the forgiveness program, which is worth up to $20,000 in debt relief per borrower, would be implemented before loan payments were set to resume in January.

    The payment pause will last until 60 days after the litigation is resolved. If the program has not been implemented and the litigation has not been resolved by June 30, payments will resume 60 days after that, according to the Department of Education.

    “I’m completely confident my plan is legal,” said President Joe Biden in a video posted to Twitter Tuesday, referencing his student loan forgiveness program.

    “But it isn’t fair to ask tens of millions of borrowers eligible for relief to resume their student debt payments while the courts consider the lawsuit,” he added.

    Last week, the Department of Justice asked the Supreme Court to step in and reinstate the student loan forgiveness program while the legal challenges play out. The program was struck down by a lower court judge in Texas on November 10.

    The payment pause extension gives the Supreme Court time to hear the case in its current term, Biden said.

    The administration had previously said the most recent extension until the end of December would be the last.

    Tuesday’s announcement marks the eighth time the payment restart date has been rescheduled since March 2020.

    Borrower balances have effectively been frozen since then, with no payments required on most federal student loans. During this time, interest has stopped adding up and collections on defaulted debt have also been on hold.

    The yearslong freeze on payments and interest is expected to cost the government $155 billion though the end of 2022, according to an estimate from the Committee for a Responsible Federal Budget. The new extension will add to that total.

    If Biden’s student loan forgiveness program is allowed to move forward, individual borrowers who earned less than $125,000 in either 2020 or 2021 and married couples or heads of households who made less than $250,000 annually in those years could see up to $10,000 of their federal student loan debt forgiven.

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

    This story has been updated with additional information.

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  • The rise and fall of Elizabeth Holmes: A timeline | CNN Business

    The rise and fall of Elizabeth Holmes: A timeline | CNN Business

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    CNN
     — 

    More than three years after Elizabeth Holmes was first indicted and nearly four months after her trial kicked off, the founder and former CEO of failed blood testing startup Theranos was found guilty on four out of 11 federal fraud and conspiracy charges.

    The verdict comes after a stunning downfall that saw Holmes, once hailed as the next Steve Jobs, go from being a tech industry icon to being a rare Silicon Valley entrepreneur on trial for fraud.

    A Stanford University dropout, Holmes – inspired by her own fear of needles – started the company at the age of 19, with a mission of creating a cheaper, more efficient alternative to a traditional blood test. Theranos promised patients the ability to test for conditions like cancer and diabetes with just a few drops of blood. She attracted hundreds of millions of dollars in funding, a board of well-known political figures, and key retail partners.

    But a Wall Street Journal investigation poked holes into Theranos’ testing and technology, and the dominoes fell from there. Holmes and her former business partner, Ramesh “Sunny” Balwani, were charged in 2018 by the US government with multiple counts of wire fraud and conspiracy to commit wire fraud. (Both pleaded not guilty.)

    Here are the highlights of the rise and fall of Elizabeth Holmes and Theranos.

    Holmes, a Stanford University sophomore studying chemical engineering, drops out of school to pursue her startup, Theranos, which she founded in 2003 at age 19. The name is a combination of the words “therapy” and “diagnosis.”

    Balwani joins as chief operating officer and president of the startup. Balwani, nearly 20 years her senior, met Holmes in 2002 on a trip to Beijing through Stanford University. The two are later revealed to be romantically involved.

    A decade after first starting the company, Holmes takes the lid off Theranos and courts media attention the same month that Theranos and Walgreens announce they’ve struck up a long-term partnership. The first Theranos Wellness Center location opens in a Walgreens in Palo Alto where consumers can access Theranos’ blood test.

    The original plan had been to make Theranos’ testing available at Walgreens locations nationwide.

    Holmes is named to the magazine’s American billionaire list with the outlet reporting she owns a 50% stake in the startup, pinning her personal wealth at $4.5 billion.

    Theranos has raised more than $400 million, according to a profile of the company and Holmes by The New Yorker. It counts Oracle’s Larry Ellison among its investors.

    The FDA clears Theranos to use of its proprietary tiny blood-collection vials to finger stick blood test for herpes simplex 1 virus – its first and only approval for a diagnostic test.

    The Wall Street Journal reports Theranos is using its proprietary technique on only a small number of the 240 tests it performs, and that the vast majority of its tests are done with traditional vials of blood drawn from the arm, not the “few drops” taken by a finger prick. In response, Theranos defends its testing practices, calling the Journal’s reporting “factually and scientifically erroneous.”

    A day later, Theranos halts the use of its blood-collection vials for all but the herpes test due to pressures from the FDA. (Later that month, the FDA released two heavily redacted reports citing 14 concerns, including calling the company’s proprietary vial an “uncleared medical device.”)

    One week after the Journal report, Holmes is interviewed on-stage at the outlet’s conference in Laguna Beach. “We know what we’re doing and we’re very proud of it,” she says.

    Holmes speaking at a Wall Street Journal technology conference in Laguna Beach, California on October 21, 2015.

    Amid the criticism, Theranos reportedly shakes up its board of directors, eliminating Henry Kissinger and George Shultz as directors while moving them to a new board of counselors; the company also forms a separate medical board.

    Safeway, which invested $350 million into building out clinics in hundreds of its supermarkets to eventually offer Theranos blood tests, reportedly looks to dissolve its relationship with the company before it ever offered its services.

    Centers for Medicare and Medicaid Services (CMS) sends Theranos a letter saying its California lab has failed to comply with federal standards and that patients are in “immediate jeopardy.” It gives the company 10 days to address the issues.

    In response, Walgreens says it will not send any lab tests to Theranos’ California lab for analysis and suspends Theranos services at its Palo Alto Walgreens location.

    CMS threatens to ban Holmes and Balwani from the laboratory business for two years after the company allegedly failed to fix problems at its California lab. Theranos says that’s a “worst case scenario.

    Balwani departs. The company also adds three new board members as part of the restructuring: Fabrizio Bonanni, a former executive vice president of biotech firm Amgen, former CDC director William Foege, and former Wells Fargo CEO Richard Kovacevich.

    Theranos voids two years of blood test results from its proprietary testing devices, correcting tens of thousands of blood-test reports, the Journal reports.

    Forbes revises its estimate of Holmes’ net worth from $4.5 billion to $0. The magazine also lowers its valuation for the company from $9 billion to $800 million.

    Walgreens, once Theranos’ largest retail partner, ends its partnership with the company and says it will close all 40 Theranos Wellness Centers.

    CMS revokes Theranos’ license to operate its California lab and bans Holmes from running a blood-testing lab for two years.

    Holmes tries to move past recent setbacks by unveiling a mini testing laboratory, called miniLab, at a conference for the American Association for Clinical Chemistry. In selling the device, versus operating its own clinics, Theranos seeks to effectively side-step CMS sanctions, which don’t prohibit research and development.

    Theranos investor Partner Fund Management sues the company for $96.1 million, the amount it sunk into the company in February 2014, plus damages. It accuses the company of securities fraud. Theranos and Partner Fund Management settled in May, 2017, for an undisclosed amount.

    The company also lays off 340 employees as it closes clinical labs and wellness centers as it attempts to pivot and focus on the miniLab.

    Walgreens sues the blood testing startup for breach of contract. Walgreens sought to recover the $140 million it poured into the company. The lawsuit was settled August, 2017.

    Theranos downsizes its workforce yet again following the increased scrutiny into its operations, laying off approximately 155 employees or about 41% of staffers.

    The Wall Street Journal reports that Theranos failed a second regulatory lab inspection in September, and that the company was closing its last blood testing location as a result.

    Theranos settles with the CMS, agreeing to pay $30,000 and to not to own or operate any clinical labs for two years.

    Theranos also settles with the Arizona Attorney General Mark Brnovich over allegations that its advertisements misrepresented the method, accuracy, and reliability of its blood testing and that the company was out of compliance with federal regulations governing clinical lab testing. Theranos agrees to pay $4.65 million back to its Arizona customers as part of a settlement deal.

    The SEC charges Holmes and Balwani with a “massive fraud” involving more than $700 million from investors through an “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”

    The SEC alleges Holmes and Balwani knew that Theranos’ proprietary analyzer could perform only 12 of the 200 tests it published on its patient testing menu.

    Theranos and Holmes agree to resolve the claims against them, and Holmes gives up control of the company and much of her stake in it. Balwani, however, is fighting the charges, with his attorney saying he “accurately represented Theranos to investors to the best of his ability.”

    Reporter John Carreyrou, who first broke open the story of Theranos for the Wall Street Journal, publishes “Bad Blood,” a definitive look at what happened inside the disgraced company. Director Adam McKay (who directed “The Big Short”) secures the rights to make the film, starring Jennifer Lawrence as Holmes, by the same name.

    Holmes and Balwani are indicted on federal wire fraud charges over allegedly engaging in a multi-million dollar scheme to defraud investors, as well as a scheme to defraud doctors and patients. Both have pleaded not guilty.

    Minutes before the charges were made public, Theranos announced that Holmes has stepped down as CEO. The company’s general counsel, David Taylor, takes over as CEO. Holmes remains chair of the company’s board.

    Former Theranos COO Ramesh

    Taylor emails shareholders that Theranos will dissolve, according to a report from The Wall Street Journal. Taylor said more than 80 potential buyers were not interested in a sale. “We are now out of time,” Taylor wrote.

    Alex Gibney, the prolific documentary filmmaker behind “Dirty Money,” “Enron: The Smartest Guys in the Room,” and “The Armstrong Lie,” debuts “The Inventor” on HBO, following the rise and fall of Theranos.

    A new court document reveals Holmes may seek a “mental disease” defense in her criminal fraud trial. Later, in August 2021, unsealed court documents reveal Holmes is likely to claim she was the victim of a decade-long abusive relationship with Balwani. The allegations led to the severing of their trials. His trial is slated to begin in 2022.

    Initially set to begin in July 2020, Holmes’ criminal trial is further delayed til July 2021 due to the coronavirus pandemic.

    News surfaces that Holmes’ is expecting her first child, once more further delaying her criminal trial. Holmes’ counsel advised the US government that Holmes is due in July 2021, a court document revealed. She gave birth in July.

    Holmes collects her belongings after going through security at the Robert F. Peckham Federal Building with her defense team on August 31, 2021 in San Jose, California.

    More than 80 potential jurors are brought into a San Jose courtroom for questioning over the course of two days to determine if they are fit to serve as impartial, fair jurors for the criminal trial of Holmes. A jury of seven men and five women is selected, with five alternatives.

    After three months of testimony from 32 witnesses, the criminal fraud case of Theranos founder Elizabeth Holmes makes its way to the jury of eight men and four women who will decide her fate. The jury would go on to deliberate for more than 50 hours before returning a verdict.

    Holmes is found guilty of one count of conspiracy to defraud investors as well as three wire fraud counts tied to specific investors. She is found not guilty on three additional charges concerning defrauding patients and one charge of conspiracy to defraud patients. The jury returns no verdict on three of the charges concerning defrauding investors. Holmes faces up to 20 years in prison as well as a fine of $250,000 plus restitution for each count.

    “The Dropout,” a scripted miniseries about Theranos produced by ABC, debuts on Hulu. Amanda Seyfried stars as Holmes and Naveen Andrews plays Balwani. Their romantic and professional relationship features prominently in the show.

    Following delays due to Holmes’ prolonged trial then a surge of Covid-19, jury selection for Balwani’s trial gets underway. On March 22, opening arguments are held and the government’s first witness, a former Theranos employee turned whistleblower, is called to the stand.

    After four full days of deliberations, a jury finds Balwani guilty of ten counts of federal wire fraud and two counts of conspiracy to commit wire fraud. Like Holmes, Balwani faces up to 20 years in prison as well as a fine of $250,000 plus restitution for each count of wire fraud and each conspiracy count.

    Holmes asks for a new trial after claiming that a key witness visited her house unannounced and allegedly said he “feels guilty” about his testimony.

    In a court filing with the United States District Court for the Northern District of California, Holmes’ attorneys said Adam Rosendorff, a former Theranos lab director who was one of the government’s main witnesses, arrived at her home on August 8 asking to speak with her. According to the filing, Rosendorff did not interact with Holmes but did speak to her partner Billy Evans, who recounted the exchange in an email to Holmes’ lawyers shortly after.

    “His shirt was untucked, his hair was messy, his voice slightly trembled,” Evans wrote about Rosendorff. According to Evans’ email, Rosendorff “said when he was called as a witness he tried to answer the questions honestly but that the prosecutors tried to make everybody look bad.”

    The former Theranos lab director also “said he felt like he had done something wrong,” Evans wrote.

    Rosendorff takes the stand again to address concerns from Holmes’ defense team and their claims he had shown up at her home after the trial concluded asking to speak with her and expressed regrets about his testimony.

    At the hearing, Rosendorff reaffirmed the truthfulness of his testimony at Holmes’ trial and said that the government did not influence what he said.

    A federal judge denies Elizabeth Holmes’ request for a new trial, according to court filings, paving the way for the founder of failed blood testing startup Theranos to be sentenced later in the month.

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  • Tosca Musk, Elon’s sister, has a business venture of her own — and it’s all about romance and female sexuality | CNN

    Tosca Musk, Elon’s sister, has a business venture of her own — and it’s all about romance and female sexuality | CNN

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    Atlanta, Georgia
    CNN
     — 

    Tosca Musk strides onto the red carpet at a Regal Cinemas, statuesque in a white pant suit and glistening burgundy silk top.

    A hush comes over a group gathered outside the theater’s doors. Some whip out cell phones and start recording her every move.

    It’s a chilly October night in Atlanta, and the fans are here for the premiere of “Torn,” the second in a trilogy of romantic fantasy movies based on books by author Jennifer Armentrout. The group of mostly female fans range in age from their twenties to their seventies, and some flew in from Boston, Detroit and other cities.

    This is a big night for Musk and her five-year-old streaming service Passionflix, the backer of the movie. It’s their first public film premiere since the pandemic started.

    She floats from one group to another, chatting effortlessly with Passionflix’s superfans, known as Passionistas. Her older brother, Elon Musk, may be the most famous sibling in the family, but he’s not the only one who’s founded a company.

    Musk, 48, is the force behind Passionflix, which adapts romance novels into movies and streams them to a devoted niche audience. Romance novels are the most popular genre of books in the United States, and Musk is tapping into that market with stories about sultry, powerful female leads and handsome men with chiseled abs. She directs some of the films herself.

    “Passionflix focuses on adapting romance novels exactly as the fan and the author envision it,” Musk says in a separate CNN interview. “We focus on connection, communication and compromise – and remove the shame from sexuality, specifically for women, because it empowers women to both acknowledge and ask for pleasure.”

    Days earlier, on the set of a Passionflix movie, “The Secret Life of Amy Bensen,” Musk provides a few glimpses into life with her famous family.

    Perched on a navy blue couch in a room tucked inside a warehouse in suburban Atlanta, she chooses her words carefully when asked about her older brother, who was on the verge of his Twitter acquisition.

    The Musk children – Elon, Tosca and another brother, middle child Kimbal – were born in South Africa and spent time in Canada before coming to the United States. Their father, Errol, is an engineer and property developer, while their glamorous mother, Maye, is a model.

    From left to right: Tosca Musk, Kimbal Musk, mother Maye Musk and Elon Musk at Maye's 50th birthday party in 1998.

    Tosca Musk attended film school at the University of British Columbia in Vancouver and moved to California after graduation. For three months, she worked for one of Elon Musk’s companies, Zip2.

    “I realized every time I stepped out of the film world, I was just not happy,” she says. “It just wasn’t my thing.”

    After a brief stint at the Los Angeles office of Canadian media company Alliance Atlantis, she began directing and producing films while still in her twenties.

    Musk produced romance films for the Lifetime and Hallmark channels and in 2005 launched a comic web series, Tiki Bar TV, which was hailed by Apple CEO Steve Jobs as ahead of its time in the emerging field of vodcasts – or video podcasting.

    Then came Passionflix. Its origin story is a classic tale of when one door closes, another one opens.

    About five years ago, Musk got an email from a woman who wanted her to turn her script into a movie. Musk loved the script, but there wasn’t much interest from production companies.

    “People weren’t really that interested because it was too risque … It was an adult movie with a little bit of reincarnation, things like that,” she says. “It just wasn’t one of those things that regular network television wanted to do.”

    But Musk met the woman, Joany Kane, in Los Angeles, and they bonded over their shared passion for romance novels. During that conversation, Kane brought up the idea of turning romance novels into movies and creating a streaming platform for them.

    And with that, Passionflix was born – with Musk at the helm and Kane as a co-founder.

    “We had no investors. We had to go out and find every investor. So it was a matter of going out and pitching every single person,” Musk says. “We pitched every friend, every family member, everybody just for that small bit of angel investment. It was hard. The first money in is always the hardest money.”

    Kevin Joy on the red carpet at the premiere of Passionflix's

    Musk declines to say whether her brother Elon was one of her original investors. But she says she can always count on her two brothers, including restaurateur Kimbal Musk, to give her advice on her business ventures. She tries not to ask unless she really needs to.

    “I get advice from them to a certain degree when I ask for it. But no unsolicited advice,” she says. “If I ask for advice, I have no doubt that he (Elon) will give it to me. And then I have to take it, because he’s going to be right. So you have to really want to know what you want to ask. But most of the time when I’m with my family, we talk about family things.”

    So what does she think about her brother’s new role as CEO of Twitter – and the flurry of headlines surrounding it?

    No comment.

    Passionflix’s first film was “Hollywood Dirt,” based on a best-selling novel by Alessandra Torre about a Southern woman who finds romance with a Hollywood star when he comes to her small town to film a movie.

    “During that shooting of that movie, we were struggling,” Musk says. “Are we going to get money? Are we going to be able to finish it? We were not really sure. We basically were just sort of piecing the dollars together.”

    In May 2017, Musk played a trailer of the movie at a romance novel convention and asked attendees to prepay $100, as founding members, for a two-year Passionflix subscription. About 4,000 people signed up, Musk says, and she and Kane used that to show potential investors they were onto something.

    “Trying to raise money for a female-driven platform on romance was just not high on anybody’s priority list at the time,” she says. “But as soon as we showed there was that many people that would come on board, the investors just started flying in.”

    Fans take photos of people on the red carpet at the premiere of Passionflix's

    Passionflix has since produced more than two dozen feature-length and short films, according to the Internet Movie Database.

    The company remains lean – it has a core team of seven people who each wear a lot of hats. In addition to producing its own content, Passionflix also licenses films for its platform.

    “I think the biggest challenge for Passionflix is we can’t produce enough content to satiate the fans,” Musk says. “It’s a struggle with so many streaming platforms, when people want original content all the time.”

    With more than 200 streaming services now competing for viewers, such niche markets face a myriad of challenges, says Dan Rayburn, a streaming media expert and consultant.

    Creating, licensing and marketing content is very costly, he said. And while romance is the biggest-selling genre of books in the US, that doesn’t necessarily mean its popularity translates to movies.

    “That’s comparing apples to oranges. Books are different,” Rayburn says. “This business is beyond tough. It’s highly competitive and requires an absolute large sum of money.”

    Passionflix charges a subscription fee of $5.99 a month. The company does not disclose its subscriber numbers. Musk says subscribers are in the “six figures,” but declines to offer specifics.

    Rayburn says it’s hard to determine the company’s profitability without knowing its expenses, including production and licensing costs.

    “OK, if you don’t have subscriber numbers, what’s the usage? How many hours per month do people watch it? How much are you spending on content licensing?”

    A deep dive into Passionflix’s online movie catalog reveals a mix of contemporary romance, fantasy romance, paranormal romance, erotic fan fiction and related sub-genres.

    The films, which stream on the Passionflix site and on Amazon Prime Video, are rated on an escalating steaminess scale Musk calls a “barometer of naughtiness.”

    The five categories: Oh So Vanilla, for wholesome romcoms; Mildly Titillating; Passion and Romance; Toe Curling Yumminess; and NSFW (Not Safe for Work). The latter category has risque plot lines and more sex – think “Fifty Shades of Grey.”

    But Musk says that even the naughtiest Passionflix movies don’t reach the soft-core porn threshold.

    “When we first started Passionflix, somebody asked us if we’re going to rate using MPAA,” she says, referring to the Motion Picture Association of America’s movie ratings such as PG-13, R, etc. “I don’t actually like any of those ratings. They’re not specific to women. I wanted something that could rate our shows and create more of a tongue-in-cheek conversation.”

    Attendees watch the premiere of Passionflix's

    Musk says she’s a romantic at heart and is a big fan of the genre.

    “Love is amazing, it’s incredibly powerful. I love to tell stories of love, all kinds of love,” she says. “So parental love, friend love, family love, and love between any kind of couple.”

    That broad range of romantic genres, and its sexy content, are what sets Passionflix apart from channels such as Hallmark and Lifetime Movie Network, says romance novelist Tamara Lush. She believes the romance genre has been especially popular during the pandemic because people seek comfort in stories with happy-ever-after endings.

    “Hallmark is romance-centered but the stories are very, very sweet. Passionflix tells a wider range of stories, and the ones romance readers want to watch,” Lush says.

    “The popularity of ‘Bridgerton,’ ‘After’ and ’365 Days’ on Netflix should tell streaming services all they need to know: that romance is a lucrative and sure bet for viewers.”

    Passionflix’s original subscribers, known as founding members, get access to movie premieres and filming sets.

    Last month in Atlanta, about four dozen of them piled into the Regal theater for the premiere of “Torn.” Following the movie, Musk hosted a question-and-answer session with the lead actors, followed by an after-party at a bar across the street. Fans and actors mingled over drinks.

    Debbie Parziale, 67, says she flew in from Boston for the event. One of the founding members, she says she spent the pandemic years curled up on her couch, watching Passionflix movies.

    “I love Tosca’s premise of empowering women and making sex not such a taboo subject,” she says. “She’s so true to the romance novels. When you read a book and watch one of her movies, it’s the book you read.”

    Debbie Parziale, Deborah Thornton and Amanda Cromer, from left, at the premiere of

    Amanda Cromer, 32, says she signed up for Passionflix at a romance book convention. She loves the camaraderie that comes with being part of the Passionistas. The group has a virtual book club, called Passion Squad.

    As one of the original members, Cromer can visit sets and interact with the actors. Cromer, who lives in a suburb of Atlanta, says that during a visit to the set of “Torn” she became an extra in a cafe scene.

    “I love the empowerment the movies bring,” says Cromer, who attended last month’s “Torn” premiere with her mother.

    “They choose books with strong female leads. They’ve done such a good job of portraying the female persona as a strong independent female, and not a timid person.”

    Back on the set of her latest romance movie, Tosca Musk moves from one sparsely furnished room to another.

    Musk lives in suburban Atlanta with her two children, 9-year-old twins who were conceived through in vitro fertilization using an anonymous sperm donor.

    She’s getting ready to fly to Italy with the twins to film “Gabriel’s Redemption,” the third book in a series by Sylvain Reynard about a Dante scholar and his passionate affair with a younger graduate student. She says they plan to enjoy lots of gelato in Florence and visit Oxford, England, so the kids can see some of the locations where the Harry Potter movies were filmed.

    As a single mother, Musk says she marvels at the path that led her to a job she loves.

    Tosca Musk poses for a portrait in Fairburn, Georgia, on October 11, 2022.

    She hopes Passionflix will help convince the film industry’s big names that adopting romance novels into movies is a worthy investment.

    “The entertainment world is controlled mostly by men. At the end of the day, the decisions tend to sway toward the male audience as opposed to the female audience,” she says. “They also tend to be more about the victimization of women than they are about sexually free or sexually empowered stories about women.”

    And for Musk, there’s also a simpler reason for her filmmaking ventures.

    “I’m a storyteller at heart,” she says. “I just want to be able to tell stories.”

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  • Biden administration notifies approved student loan relief applicants as program remains tied up in courts | CNN Politics

    Biden administration notifies approved student loan relief applicants as program remains tied up in courts | CNN Politics

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    CNN
     — 

    The Biden administration started notifying individuals who are approved for federal student loan relief on Saturday even as the future of that relief remains in limbo after lower courts blocked the program nationwide.

    The Department of Education began sending emails to borrowers who have been approved to have their federal student loans relieved, explaining that recent legal challenges have kept the administration from discharging the debt.

    “We reviewed your application and determined that you are eligible for loan relief under the Plan,” Education Secretary Miguel Cardona wrote in the e-mail, which was provided to CNN. “We have sent this approval on to your loan servicer. You do not need to take any further action.”

    “Unfortunately, a number of lawsuits have been filed challenging the program, which have blocked our ability to discharge your debt at present. We believe strongly that the lawsuits are meritless, and the Department of Justice has appealed on our behalf,” Cardona added.

    Cardona’s e-mail further explains the administration will “discharge your approved debt if and when we prevail in court” and promises to provide further updates.

    The program, which would offer up to $20,000 of debt relief to millions of qualified borrowers, remains on hold after lower courts blocked the program.

    The Biden administration has been unable to discharge any debt and stopped accepting applications due to the court rulings. About 26 million people applied for student loan relief prior to the recent court decisions with 16 million of those applications being approved, according to the Biden administration.

    “President Biden is fighting to get millions of borrowers the relief they need and deserve,” White House spokesperson Abdullah Hasan said. “Some Republican officials and special interests are blocking that from happening. We’re making clear to student borrowers who is standing with them, and who isn’t.”

    The Biden administration asked the Supreme Court on Friday to allow its student debt relief program to go into effect while the legal challenges continue to play out.

    An “erroneous injunction” from a federal appeals court, Solicitor General Elizabeth Prelogar told the Supreme Court, “leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations.”

    Government lawyers say that President Joe Biden acted in order to address the financial harms of the pandemic and “smooth the transition to repayment” in order to provide targeted debt relief to certain federal student-loan borrowers affected by the pandemic.

    The Supreme Court has asked the plaintiffs for a response by noon on Wednesday.

    The Biden administration’s request comes as the 8th Circuit Court of Appeals earlier this week issued a nationwide injunction on the program following a challenge by Republican-led states, who argue that the student loan debt relief plan violates the separations of power and the Administrative Procedure Act, a federal law that governs the process by which federal agencies issue regulations.

    This followed a ruling from a federal judge in Texas who declared the program illegal earlier this month.

    Payments on federal student loans are set to resume in January after a years-long pause due to the pandemic.

    When asked if the administration is considering extending the moratorium on student loan payments, White House press secretary Karine Jean-Pierre said the administration is “examining all options to provide middle-class families a little extra breathing room.”

    The president last extended the freeze on federal student loan payments in August when he rolled out the sweeping student debt relief plan.

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  • Elizabeth Holmes scheduled to be sentenced on Friday | CNN Business

    Elizabeth Holmes scheduled to be sentenced on Friday | CNN Business

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    CNN
     — 

    Elizabeth Holmes, the founder of failed blood testing startup Theranos who was convicted of fraud earlier this year, is scheduled to be sentenced on Friday morning by a judge in court in San Jose, California.

    Holmes, who was found guilty in January on four charges of defrauding investors, faces up to 20 years in prison as well as a fine of $250,000 plus restitution for each count.

    Lawyers for the government asked for a 15-year prison term, as well as probation and restitution, while Holmes’ probation officer pushed for a nine-year term. Holmes’ defense team asked Judge Edward Davila, who is presiding over her case, to sentence her to up to 18 months of incarceration followed by probation and community service.

    More than 100 people wrote letters in support of Holmes to Davila, asking for leniency in her sentencing. The list includes Holmes’ partner, Billy Evans, many members of Holmes’ and Evans’ families, early Theranos investor Tim Draper, and Sen. Cory Booker. Booker described meeting her at a dinner years before she was charged and bonding over the fact that they were both vegans with nothing to eat but a bag of almonds, which they shared.

    “I still believe that she holds onto the hope that she can make contributions to the lives of others, and that she can, despite mistakes, make the world a better place,” Booker wrote, noting that he continues to consider her a friend.

    Friday’s sentencing hearing caps off Holmes’ stunning downfall. Once hailed as a tech industry icon for her company’s promises to test for a range of conditions with just a few drops of blood, she is now the rare tech founder to be convicted and face prison time for her company’s missteps.

    Holmes, now 38, started Theranos in 2003 at the age of 19 and soon thereafter dropped out of Stanford University to pursue the company full-time. After a decade under the radar, Holmes began courting the press with claims that Theranos had invented technology that could accurately and reliably test for a range of conditions using just a few drops of blood taken from a finger prick.

    Theranos raised $945 million from an impressive list of investors, including media mogul Rupert Murdoch, Oracle founder Larry Ellison, Walmart’s Walton family and the billionaire family of former Secretary of Education Betsy DeVos. At its peak, Theranos was valued at $9 billion, making Holmes a billionaire on paper. She was lauded on magazine covers, frequently wearing a signature black turtleneck that invited comparisons to late Apple CEO Steve Jobs. (She has not worn that look in the courtroom.)

    The company began to unravel after a Wall Street Journal investigation in 2015 found the company had only ever performed roughly a dozen of the hundreds of tests it offered using its proprietary blood testing device, and with questionable accuracy. Instead, Theranos was relying on third-party manufactured devices from traditional blood testing companies.

    In 2016, Theranos voided two years of blood test results. In 2018, Holmes and Theranos settled “massive fraud” charges with the Securities and Exchange Commission, but did not admit to or deny any of the allegations as part of the deal. Theranos dissolved soon after.

    In her trial, Holmes alleged she was in the midst of a decade-long abusive relationship with her then-boyfriend and Theranos COO Ramesh “Sunny” Balwani while running the company. Balwani, she alleged, tried to control nearly every aspect of her life, including disciplining her eating, her voice and her image, and isolating her from others. (Balwani’s attorneys denied her claims.)

    In July, Balwani was found guilty on all 12 charges in a separate trial and faces the same potential maximum prison time as her. Balwani is scheduled to be sentenced on December 7.

    “The effects of Holmes and Balwani’s fraudulent conduct were far-reaching and severe,” federal prosecutors wrote in a November court filing regarding Holmes’ sentencing. “Dozens of investors lost over $700 million and numerous patients received unreliable or wholly inaccurate medical information from Theranos’ flawed tests, placing those patients’ health at serious risk.”

    Holmes’ sentencing, however, could be complicated by developments in her life after stepping down from Theranos. Holmes and her partner, Evans, who met in 2017, have a young son. Holmes is also pregnant, as confirmed by recent court filings and her most recent court appearance in mid October.

    Mark MacDougall, a white-collar defense lawyer and former federal prosecutor, told CNN Business that the fact that Holmes has a young child could impact how she is sentenced.

    “I don’t know how it can’t, just because judges are human,” he said.

    MacDougall also said he doesn’t see what a long prison sentence accomplishes. “Elizabeth Holmes is never going to run a big company again,” he said. “She’s never going to be in a position to have something like this happen again.”

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  • Fed officials crushed investors’ hopes this week | CNN Business

    Fed officials crushed investors’ hopes this week | CNN Business

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    New York
    CNN Business
     — 

    Investors sleuthing for clues about what the Federal Reserve will decide during its December policy meeting got quite a few this week. But those hints about the future of monetary policy point to an outcome they won’t be very happy about.

    What’s happening: Federal Reserve officials made a series of speeches this week indicating that aggressive interest rate hikes to fight inflation would continue, souring investors’ hopes for a forthcoming central bank policy shift. On Thursday, St. Louis Federal Reserve President James Bullard said the central bank still has a lot of work to do before it brings inflation under control, sending the S&P 500 down more than 1% in early trading. It later pared losses.

    Bullard, a voting member on the rate-setting Federal Open Market Committee (FOMC), said that the moves the Fed has made so far to fight inflation haven’t been sufficient. “To attain a sufficiently restrictive level, the policy rate will need to be increased further,” he said.

    Those comments come a day after Kansas City Fed President Esther George, a voting member of the FOMC, said to The Wall Street Journal that she’s “looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there.”

    San Francisco Fed President Mary Daly added on Wednesday that a pause in rate hikes was “off the table.”

    A numbers game: Fed officials should increase interest rates to somewhere between 5% and 7% to tamp inflation, Bullard said Thursday. Those numbers shocked investors, as they would require a series of significant and economically painful hikes which increase the chance of a hard landing.

    The current interest rate sits between 3.75% and 4% and the median FOMC participant projected a peak funds rate of 4.5-4.75% in September. If those numbers hold steady, Fed members would only raise rates by another three-quarters of a percentage point.

    But Fed Chair Powell said at the November meeting that the projections are likely to rise in December and if Bullard is correct, that means investors can expect another one to three percentage points in rate hikes.

    Dreams of a pivot: October’s softer-than-expected CPI and producer price reading bolstered investors’ hopes that the Fed might ease its aggressive rate hikes and sent markets soaring to their best day since 2020 last week.

    But messaging from Fed officials this week has brought Wall Street back down to earth.

    That’s because market rallies help to expand the economy, said Liz Ann Sonders, Managing Director and Chief Investment Strategist at Charles Schwab, which is the opposite of what the Fed is trying to do with its tightening policy. Fed officials could be attempting to do some “jawboning” via excessively hawkish speeches in order to bring markets down, she said.

    The bottom line: Investors listen closely to Bullard’s comments because he’s known for having looser lips than other Fed officials, Peter Boockvar, chief investment officer of Bleakley Financial Group, wrote in a note Thursday. But his hawkish predictions may have been “overboard,” especially since he won’t be a voting member of the FOMC next year.

    Still, Wall Street analysts are listening. Goldman Sachs raised its peak fed funds rate forecast on Thursday to 5-5.25%, up from 4.75-5%.

    A series of high-profile layoffs have rattled Big Tech this month.

    Amazon confirmed that layoffs had begun at the company and would continue into next year, just days after multiple outlets reported the e-commerce giant planned to cut around 10,000 employees. Facebook-parent Meta recently announced 11,000 job cuts, the largest in the company’s history. Twitter also announced widespread job cuts after Elon Musk bought the company for $44 billion.

    The series of high-profile layoff announcements prompted fears that the labor market was weakening and that a recession could be around the corner.

    Those fears aren’t unwarranted: The Federal Reserve is actively working to slow economic growth and tighten financial conditions to rebalance the white-hot labor market. Further layoffs in both tech and other industries are likely inevitable as the Fed continues to raise interest rates.

    But this wave of layoffs isn’t as significant as headlines might lead Americans to believe. Thursday’s weekly jobless claims actually fell by 4,000 to 222,000 in spite of the surge in tech job cuts.

    In a note on Thursday Goldman Sachs analysts outlined three reasons why the layoffs may not point to a looming recession in the US.

    First off, the tech industry accounts for a small share of aggregate employment in the US. While information technology companies account for 26% of the S&P 500 market cap, it accounts for less than 0.3% of total employment.

    Second, tech job openings remain well above their pre-pandemic level, so laid-off tech workers should have good chances of finding new jobs.

    Finally, tech worker layoffs have frequently spiked in the past without a corresponding increase in total layoffs and have not historically been a leading indicator of broader labor market deterioration, Goldman analysts found.

    “The main problem in the labor market is still that labor demand is too strong, not too weak,” they concluded.

    Mortgage rates dropped sharply last week following a series of economic reports that indicated inflation may finally be easing, reports my colleague Anna Bahney

    The 30-year fixed-rate mortgage averaged 6.61% in the week ending November 17, down from 7.08% the week before, according to Freddie Mac, the largest weekly drop since 1981.

    But that’s still significantly higher than a year ago when the 30-year fixed rate stood at 3.10%.

    “While the decline in mortgage rates is welcome news, there is still a long road ahead for the housing market,” said Sam Khater, Freddie Mac’s chief economist. “Inflation remains elevated, the Federal Reserve is likely to keep interest rates high and consumers will continue to feel the impact.”

    Affording a home remains a challenge for many home buyers. Mortgage rates are expected to remain volatile for the rest of the year. And prices remain elevated in many areas, especially where there is a very limited inventory of available homes for sale.

    Meanwhile, inflation and rising interest rates mean many would-be buyers are also facing tightened budgets.

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  • Global investors are bullish again on China as Beijing switches to damage control | CNN Business

    Global investors are bullish again on China as Beijing switches to damage control | CNN Business

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    Hong Kong
    CNN Business
     — 

    Market sentiment on Chinese stocks hit rock bottom just weeks ago after President Xi Jinping secured a historic third term in power and stacked his top team with loyalists in a clean sweep not seen since the Mao era.

    But in the past week, a series of unexpected steps by Beijing — the easing of draconian zero-Covid restrictions, moves to salvage the ailing property sector and Xi’s personal return to the world stage -— have triggered a huge rally.

    Hong Kong’s benchmark Hang Seng

    (HSI)
    Index has gained 14% since last Friday, putting it squarely into bull market territory, or more than 20% above its recent low. A key index of Chinese stocks in New York jumped 15% during the same period.

    On the tightly controlled mainland markets, Shanghai and Shenzhen stocks have also advanced more than 2%.

    “China continued to see a barrage of upside activity… as reopening measures are a clear buy signal,” said Stephen Innes, managing partner for SPI Asset Management. “We are in a sea change after China’s more progressive policy evolution arrived unexpectedly.”

    Investors now have a “tactically constructive” view on China after key concerns were addressed by credible policy actions, according to Bank of America’s monthly survey of Asian fund managers released on Wednesday.

    Some investment banks even upgraded their China growth forecasts following the policy changes. On Wednesday, ANZ Research hiked its China GDP forecast to 5.4% for 2023 from 4.2% previously.

    “The changes reflect the party leadership’s intention to stop losses. They want to correct the market’s perception of China’s economic outlook, as President Xi Jinping interacts with global leaders at G20,” it said.

    Investors sold off China stocks in October due to fears that Xi’s tightening grip on power would lead to the continuation of existing policies, such as zero-Covid and the common prosperity campaign, that have dragged down the economy and battered financial markets.

    A leadership team loyal to Xi also suggested that China may continue to prioritize ideology over the kind of pragmatic decision-making that had enabled the country’s swift economic rise over the past four decades.

    But the latest policy shifts, although not a full-throated economic opening, have been enough to excite investors and analysts waiting for any sign of China easing its rules.

    From Bali to Bangkok, Xi returned to the world stage after a near three-year absence. There were encouraging signs, in particular, coming from the historic meeting between Xi and US President Joe Biden on Monday, which fueled expectations for stronger economic ties between the two major world powers.

    “The US’s willingness to set a ‘floor’ on US-China relations likely means the US is keen to find common ground with China to prevent extreme outcomes,” said Jefferies analysts in a research note earlier this week.

    Chinese companies on Wall Street have been hammered by delisting risks since last year because of a simmering spat between the two countries over audits. In December, US regulators finalized rules to ban trading in shares of Chinese companies if they can’t access their audit papers, a request that had been denied by Beijing on national security grounds.

    “We believe the Xi-Biden meeting could reduce the risk of Chinese ADRs being delisted,” the Jefferies analysts added.

    In August, the two countries reached an agreement to allow US officials to inspect the audit papers of those firms, taking a first step toward resolving the dispute.

    Reuters also reported Wednesday that US regulators gained “good access” in their review of auditing work done on New York-listed Chinese firms during a seven-week inspection in Hong Kong.

    Despite this week’s rally, some analysts remain cautious. Qi Wang, CEO of MegaTrust Investment in Hong Kong, said the recovery may be driven by a lot of buying to close out previous short positions and money chasing quick returns.

    “I don’t think the long-term appetite for China and Hong Kong shares will return so quickly. Right or wrong, there were some fatal blows to global investor confidence earlier this year,” Wang said.

    “There is some good news recently, but the big institutional money still need time to assess the situation, including the economic prospect for next year,” he added.

    Including the recent surge, the Hang Seng index is still down 23% this year, making it one of the world’s worst performing indices. The Nasdaq Golden China Index, a popular index tracking Chinese companies in New York, has plunged more than 33% so far in 2022.

    “This week’s rally is a strong over-reaction to mildly positive news,” said Brock Silvers, Hong Kong-based chief investment officer at Kaiyuan Capital, a private equity investment firm. “The market was desperate for good news, but it’s foolish to think that once Covid is behind us we’ll return to the go-go days of high octane growth.”

    Silvers added that the economic factors and political risks that made China “uninvestable” a month ago are still prevalent and are likely to reassert themselves before long.

    China is still dealing with Covid outbreaks and remains firmly committed to measures long abandoned by most other nations. Even more serious is the real estate crisis and the risks that poses for the banking sector, he said, adding that the 16-point rescue plan Beijing announced last Friday did not go far enough.

    Hao Hong, chief economist for Grow Investment Group, described the rally as sentiment-driven and technical in nature, because the market was previously oversold to an epic level.

    But as winter is coming, Covid cases are set to rise.

    “Whether we could deal with the resurgence with adequate medical facilities and without panic remains to be seen,” he said, adding it also remains uncertain how effective the new property support measures are and whether the developers can “rise from ashes.”

    If China re-tightens Covid restrictions or US-China tension flares up again, market sentiment could plummet once more, he said.

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  • Stocks have been clobbered this year, but people are still contributing to their retirement accounts | CNN Business

    Stocks have been clobbered this year, but people are still contributing to their retirement accounts | CNN Business

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    Stocks and bonds have been turning in volatile, bearish performances this year in an economy marked by high inflation and rising interest rates. But that hasn’t deterred most retirement savers, especially the youngest ones.

    401(k) participants have held relatively steady in their savings contribution rates and in their portfolio allocations, according to new third quarter data from Fidelity Investments. And GenZers have actually increased their contributions.

    By the end of the third quarter, the S&P 500 was down 25% for the year. The Nasdaq had fallen 33%. And the S&P US aggregate bond index was off about 13%.

    So it’s not surprising that the average 401(k) account balance fell to $97,200 in the third quarter, according to Fidelity, one of the country’s leading providers of workplace retirement plans. That’s down 6% from the second quarter and 23% from a year earlier.

    But the average savings rate among 401(k) participants, meanwhile, held relatively steady at 13.8%, which includes both employee and employer contributions. That’s only down a fraction from the 13.9% recorded in the second quarter and the 14% recorded in the first quarter.

    Meanwhile GenZers in the workplace – those roughly ages 22 to 25 – increased their savings levels from 10% to 10.3%. That may account for why the youngest generation of today’s employees actually saw their account balances increase 1.2% relative to the second quarter, despite terrible market performance.

    In terms of gender differences, men saved a bit more than women (14.5% versus 13.5%). And age wise, Boomers on the cusp of retirement saved the most (16.5%).

    Allocations also held fairly steady, Fidelity found, with only 4.5% of 401(k) and 403(b) plan participants opting to make a change in the third quarter. The majority of those who did made just one change, and only 29% of them opted for a more conservative investment.

    Despite the volatility in the markets and the economy this year, “Retirement savers have wisely chosen to avoid the drama and continue making smart choices for the long-term,” said Kevin Barry, president of Workplace Investing at Fidelity Investments.

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  • Target warns of a weak holiday season. Shares are tumbling | CNN Business

    Target warns of a weak holiday season. Shares are tumbling | CNN Business

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    New York
    CNN Business
     — 

    Target’s profit plunged 52% in the third quarter and the retailer warned of a sluggish holiday.

    Target blamed inflation and a deteriorating economic outlook for its miserable quarter — and also lowered its outlook for the rest of the year. That sent shares down more than 12% in premarket trading.

    CEO Brian Cornell said that in recent weeks that “sales and profit trends softened meaningfully, with guests’ shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty.”

    Still, it wasn’t all bleak: Sales of necessities were strong, including food and house essentials. Similar to Walmart, Target said sales in “discretionary categories” like electronics and clothing hampered its bottom line.

    Target

    (TGT)
    plans to reduce costs by $3 billion over the next three years in an effort to “simplify and gain efficiencies across its business with a focus on reducing complexities and lowering costs,” it said.

    Looking forward to the busy holiday shopping season, Cornell said the “rapidly evolving consumer environment means we’re planning the balance of the year more conservatively.” Target forecasts a low-single digit percentage decline in sales at stores open at least a year.

    “This quarter confirms that the middle-class consumer has been hit hard by inflation and is changing the way they spend by trading down, buying more value-priced goods, and shifting to white label products,” said Hilding Anderson, head of retail strategy at digital consultancy Publicis Sapient, in an email. “It suggests continued headwinds for the non-value players in big box retail during the balance of this holiday season.”

    Earlier this year, Target’s inventory glut forced the company to hold massive discounts on big-ticket items to alleviate the problem. It marked down prices on some discretionary purchases that consumers have pulled back on and canceled pending orders from suppliers.

    Target shares are down more than 20% for the year.

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  • Britain is bringing back austerity. Here’s why | CNN Business

    Britain is bringing back austerity. Here’s why | CNN Business

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    London
    CNN Business
     — 

    The last time a British finance minister revealed tax and spending plans, markets went haywire and the country’s prime minister ultimately lost her job. The new government is not looking for a repeat performance.

    On Thursday, Chancellor Jeremy Hunt is due to unveil a budget that will aim to restore confidence in the United Kingdom’s ability to manage its public finances. But that may be easier said than done.

    The country is staring down the barrel of a grueling recession, and investors remain on edge as interest rates rise. That requires Hunt, who has acknowledged that Britain faces “extremely difficult” decisions, to pull off a delicate balancing act.

    Media reports indicate that the government is looking to come up with between £50 billion ($59 billion) and £60 billion ($70 billion) through a mix of tax increases and spending cuts, many of which may not take effect until after the next election in 2024.

    “If you do too much, too soon, you risk worsening the recession,” said Ben Zaranko, a senior research economist at the Institute for Fiscal Studies. “If you delay everything until after the next election, you risk not being seen as credible.”

    A new wave of austerity could help restore the government’s reputation with financial markets after the budget from former Prime Minister Liz Truss — which featured an unorthodox combination of major tax cuts and ramped-up borrowing — unleashed panic.

    But it will do little to ease fears about the country’s grim economic prospects. The United Kingdom is one of two G7 economies to have contracted in the third quarter. It’s now smaller than it was before the coronavirus pandemic. The Bank of England is forecasting a lengthy recession, which could stretch into 2024.

    New cuts could make matters worse. When the government adopted an austerity program in 2010 on the heels of the Great Recession, it shaved 1% off the country’s GDP, according to the UK budget watchdog. Just four years ago, former Prime Minister Theresa May pledged to bring nearly a decade of austerity to a close.

    Now, tax rises could further depress consumer confidence — already near a record low — and spending cuts risk placing further strain on public services that are already buckling under enormous pressure.

    Still, Hunt intends to show he has a plan to reduce government debt as a proportion of GDP in the medium-term. It currently stands at 98%. The Office for Budget Responsibility said in July that it could reach nearly 320% in 50 years.

    “We do have to do some tax rises, do some spending cuts, if we’re going to show we’re a country that pays our way,” Hunt told Sky News on Sunday.

    How did the United Kingdom get here? There’s no shortage of finger pointing.

    Part of the problem is global in nature. Interest rates have risen rapidly around the world as central banks attempt to rein in inflation. That’s pushed up borrowing costs for the government, dealing a shock after years in which money was cheap.

    At the same time, skyrocketing energy costs, exacerbated by Russia’s war in Ukraine, have compelled governments to step in to cushion the blow of crippling energy bills — shortly after they spent significant sums helping households and businesses through the pandemic.

    Hunt has scrapped plans to cap energy bills for typical households at £2,500 ($2,981) for the next two years. Instead, support will only be guaranteed until next spring. But the measures will still prove costly.

    The government can’t blame all its problems on the rest of the world, however.

    “You can just look at how the UK is performing relative to every other country in Europe, and it’s obvious there’s a UK-specific element to this,” Zaranko said.

    The United Kingdom’s exit from the European Union has weighed on trade and contributed to shortages of workers in key industries.

    “The UK economy as a whole has been permanently damaged by Brexit,” former Bank of England official Michael Saunders told Bloomberg TV this week. “If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week. The need for tax rises, spending cuts wouldn’t be there.”

    And while inflation in the United States cooled more than expected in October, falling to 7.7%, it’s still rising sharply in the United Kingdom, reaching a 41-year high of 11.1% last month.

    That’s bolstering expectations that the Bank of England will need to keep raising interest rates and could hold them higher for longer, though recession may complicate those forecasts.

    The country’s labor market also remains extremely tight, with an employment rate lower than before the coronavirus hit and a record number of people who aren’t working due to long-term illness.

    “The UK does stand out in that labor supply has been very constrained, perhaps more so than in other countries,” said Ruth Gregory, senior UK economist at Capital Economics.

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  • Yet another key economic report is showing inflation pressures are easing | CNN Business

    Yet another key economic report is showing inflation pressures are easing | CNN Business

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    Minneapolis
    CNN Business
     — 

    A key measure of inflation, wholesale prices, rose by 8% in October from a year before, according to the latest report from the Bureau of Labor Statistics.

    While still historically high, it was the smallest increase since July of last year and significantly better than forecasts. It’s the second inflation report this month to show signs of cooling in the rising prices that have plagued the economy.

    Economists expected the Producer Price Index, which measures prices paid for goods and services before they reach consumers, to show an annual increase of 8.3%, down from September’s revised 8.4%.

    On a monthly basis, producer prices rose 0.2%, below expectations and even with the revised 0.2% increase seen in September.

    Year-over-year, core PPI — which excludes food and energy, components whose pricing is more prone to market volatility — measured 6.7%, down from September’s revised annual increase of 7.1%.

    Month-over-month, core PPI prices were flat, the lowest monthly reading since November 2020. In September, core PPI increased by a revised 0.2% from the month before.

    Economists had expected annual and monthly core PPI to measure 7.2% and 0.3%, respectively, according to estimates on Refinitiv.

    President Joe Biden heralded October’s PPI report Tuesday calling it “more good news for our economy this morning, and more indications that we are starting to see inflation moderate.”

    “Today’s news – that prices paid by businesses moderated last month – comes a week after news that prices paid by consumers have also moderated,” Biden wrote Tuesday. “And, today’s report also showed that food inflation slowed – a welcome sign for family’s grocery bills as we head into the holidays.”

    For much of this year, the Federal Reserve has sought to tamp down decades-high inflation by tightening monetary policy, including issuing an unprecedented four consecutive rate hikes of 75 basis points, or three-quarters of a percentage point.

    The better-than-expected PPI data reflects an economy that has slowed, with supply moving more into balance, said Jeffrey Roach, chief economist for LPL Financial.

    Costs associated with transportation and warehousing, for example, declined for the fourth consecutive month, a likely result of the improved global shipping climate, he said. Producer costs for new cars fell the most since May 2017, he added.

    “Barring geopolitical or financial crises, inflation should continue its deceleration into 2023,” he said in a statement.

    Since PPI captures price changes happening further upstream, the report is considered by some to be a leading indicator for broader inflationary trends and a predictor of what consumers will eventually see at the store level.

    “The PPI read certainly adds more fuel to the fire for those who feel we may finally be on a downward inflation trend,” Mike Loewengart, Morgan Stanley’s head of model portfolio construction, said in a statement.

    Last week’s Consumer Price Index showed inflation slowed to 7.7% from 8.2% year-over-year for consumer goods, surprising investors and giving Wall Street its biggest boost since 2020.

    The CPI data was “reassuring,” Fed vice chair Lael Brainard said on Monday, signaling that the rate hikes appear to be taking hold, and if the economic data continues to show inflation on the decline, then the central bank could scale back the extent of its future rate hikes.

    “When you look at the inflation numbers, there’s some evidence that we’ve peaked, but are we coming down quickly?” Steven Ricchiuto, chief economist for Mizuho Americas told CNN Business.

    Ricchiuto noted that the October figures are only a couple steps lower than what was seen in September.

    “These aren’t the types of things that tell the Fed to stop tightening rates,” he said. However, “they may tell you [that] you don’t need 75 basis points.”

    CNN’s DJ Judd and Matt Egan contributed to this report.

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